Fairy rings are a unique landscape type in grassland ecosystems, formed by the growth and dispersal of mushroom fungal mycelium in the soil. They significantly alter plant growth and development. However, there is a lack of comprehensive knowledge on how fairy rings influence the growth processes of plants, thereby altering community structure and function. We conducted a field investigation of two fairy rings (Leucocalocybe mongolica and Agaricus arvensis) at different sites (in the fairy ring, on the fairy ring, and out of the fairy ring) in a typical steppe in Inner Mongolia, China, in August 2023. The results showed that the height, cover, density, and aboveground biomass of Leymus chinensis on the two fairy rings were significantly higher than those inside and outside the two fairy rings (P < 0.05), while height, cover, density, and aboveground biomass of Stipa grandis were significantly decreased on the two fairy rings, compared with those inside and outside the two fairy rings. These indicators had no significant difference between inside the fairy rings and outside the fairy rings. Due to these divergent changes, important values of L. chinensis and S. grandis on the two fairy rings were significantly increased (A. arvensis ring: 0.15→0.50; L. mongolica ring: 0.17→0.53) and decreased (A. arvensis ring: 0.27→0.13; L. mongolica ring: 0.39→0.10), respectively. Species richness, Shannon-Wiener index, Simpson index, and Pielou index on the two fairy rings were significantly lower than those inside and outside the two fairy rings. Under the effects of the two fairy rings, the increase in dominance of L. chinenesis and the decrease in dominance of S. grandis increased community cover and above-ground biomass, decreased plant diversity, and ultimately changed the community characteristics of typical steppes. This study is of great scientific significance for understanding of the changes in the structure and function of grassland communities under the effects of the fairy rings.