This study deals with desertification and its impacts on environment in the source region of the Yellow River. Our objectives were to reveal and quantify desertifcation changes from 1990-2000 by remote sensing and GIS, and discuss its impacts on carbon cycle. The results indicate that the study area is one of the most desertified regions in northeast Qinghai-Tibetan Plateau. The study area is now a carbon source. The desertification would have contributed to CO2 emission from grasslands of Qinghai-Tibetan Plateau. Otherwise, there are great potential to resequestration carbon through controlling grazing, restoring ecosystem, and reducing desertification.