Alpine steppe is one of the dominant grassland types on Tibetan Plateau. It plays an important role in global carbon cycle, nitrogen cycle, biodiversity conservation, soil and water conservation, and animal husbandry development. This study selected five sampling plots with different degradation levels on the degraded alpine steppe in Maduo county, Guoluo Prefecture, Qinghai Province. The composition of plant functional groups and soil physical and chemical properties were investigated in the sampling plots. We used the multivariate analysis to analyze the relationship between plant functional composition and soil physical and chemical properties. The results showed that: (1) with the steppe degradation increasing, the richness and the important value of Gramineae functional group increased firstly and then decreased, but the coverage of Gramineae functional group was decreasing. The richness, coverage and important value of forbs functional group increased firstly and then decreased, while the important value of forbs functional group was increasing. (2) The content of soil organic matter was decreasing with the soil depth increasing. The content of soil organic matter and total soil nitrogen were decreasing with the steppe degradation increasing. (3) As the steppe degradation increasing, the soil bulk density, soil porosity at the depth of 0―30 cm were increasing, while the soil moisture content decreased firstly and then increased. (4) The important value of each plant functional group was positively correlated with soil porosity and negatively correlated with soil bulk density. Through redundancy analysis, the grassland degradation firstly affected soil physical properties and then affected the composition of plant functional groups.