Due to global climate change and anthropogenic disturbance such as overgrazing, many arid and semiarid grasslands have been encroached by shrubs during recent decades. In this study, three Caragana microphylla shrub-encroached grasslands with different exclusion restoration periods (fenced since 1979, 1983 and 2003, respectively) were selected in Xilingol steppe region to analyze the effects of enclosure period on the population size structure of C. microphylla and the interspecific associations among main species in the shrub interspaces. In addition, we tried to analyze the corresponding mechanisms by testing niche space distribution of species in the shrub interspaces. (1) The skewness of size structures of C. microphylla was positive in eight out of nine plots, indicating significantly positive skewness. The size of C. microphylla increased with the elongation of enclosure period in the low or middle shrub coverage plots, mainly due to the decrease or disappearance of C. microphylla less than 0.5 m. (2) With the elongation of enclosure period, the niche width (B) of perennial grasses in the shrub interspaces increased, i.e., B_{1979 Fenced} > B_{1983 Fenced} > B_{2003 Fenced}, and the interspecific associations among main species in the shrub interspaces shifted from negative association (competition) to positive association (facilitation). The findings not only revealed the community dynamics and tendency of C. microphylla shrub-encroached grasslands under fencing condition, but also provided insight into the corresponding mechanisms in terms of C. microphylla's population size structure and the interspecific associations among main species in the shrub interspaces. The results would provide experimental data and theoretical guidance for the rational utilization and restoration policy-making in the shrub-encroached grasslands.