Grassland deterioration is an urgent problem in China. Changes in seven grassland types and their ecosystem service values (ESVs) in Urumqi City were calculated based on the classification results. A classification and grading system for grassland was designed based on fieldwork and an expert review. In addition, grid cell and spatial autocorrelation analyses were used to explain the degree of mountain grassland degradation and ESV changes in the study area. We interpreted Landsat TM/OLI images of the study area in 1994, 2000, 2005, 2010, and 2015. The results showed that the degraded grasslands reached a maximum area of 1.22×10⁵ hm² in 2000. However, the rate of grassland degradation decreased from 2000 to 2015 with the decreased 387 hm² each year. The total ESVs of the grasslands demonstrated volatile decreasing trends with an annual reduction of 0.27×10⁷ yuan. The ecological losses were mainly caused by the degradation of mountain desert grassland, mountain desert steppe type rangeland, mountain meadow type rangeland, and alpine meadow steppe type rangeland. Among the individual ESVs, grasslands made higher contributions to the regulating (soil formation) and supporting (pollination) services, while the provisioning and cultural services of the grasslands were relatively low and accounted for only 0.69% and 0.55% of the total ESV. The mean Moran's I value was 0.869 for the grassland ESVs from 1994 to 2015. The grassland ESVs exhibited high spatial autocorrelation with adjacent grid cells (2 km×2 km). The grassland ESVs had clear spatial distributions characteristics. The regions with high ESVs were basically distributed in the Nanshan mountainous area. The low ESV regions were mainly located in the plain grassland region. The Bogda mountainous regions presented random distribution patterns. The results showed that a region-wide grazing ban and the control of rodent and locust hazards combined with other ecological engineering measures were promising for reversing the degradation and promoting the recovery of grassland vegetation. Thus, the urgent actions are required to maintain or promote the ecosystem services of mountain grassland in the arid and semiarid regions of Urumqi City, Northwest China.