Abstract In order to find out how small scale topographical factors affect growth and physiological characters of Caragana microphylla, which is a widely distributed shrub species and has an important role in restoring degraded grassland in natural ecosystem, a natural population of C. microphylla was chosen in a typical steppe community in June, 2009. The population was 34 km to the southeast of Xilinhot City, China, and a total of 54 shrubs were selected from different slope aspects and positions. We investigated the photosynthetic and morphological characters of these shrubs and analyzed the relationship between plant traits of C. microphylla and soil nitrogen and phosphorus availability. Moreover, the relationship between plant traits of C. microphylla and herbaceous aboveground biomass was studied. (1) The maximum net photosynthetic rate (Pn max) was significantly lower on shady slopes than that on sunny slopes and higher on upper slopes than that on lower slopes. Stomatal conductance (Gs), net photosynthetic rate/intercellular CO 2 concentration (Pn/Ci) and intercellular CO 2 concentration (Ci) under saturated irradiance showed similar trends with slope aspect and position. Likewise, the maximum photochemical efficiency of PSII (Fv/Fm), PSII potential activity (Fv/Fo) and the first-year shoot morphological characters of C. microphylla were also correlated with slope aspect and position. (2) Soil nitrogen availability showed no significant effect on photosynthetic or morphological traits of C. microphylla, however, there were several significant relationships between soil phosphorus availability and plant traits. Dry weight, shoot length, compound leaf size, and leaflet length of first-year shoots of C. microphylla were significantly negatively correlated with soil C:P ratio. Though not significant, photosynthetic parameters under saturated light and other morphological characters of first-year shoots were negatively correlated with soil C:P ratio, i.e., these traits increased with increasing soil phosphorus availability. These suggested that the difference of soil phosphorus availability played an important role in making C. microphylla having different photosynthetic and morphological characters on different slope aspects and positions. The individuals grown in relatively P-rich site had longer shoots and larger leaves and grew better. Low phosphorus content was thought to limit photosynthetic activity through several different mechanisms, including both stomatal and non-stomatal limitations, the latter being more likely in the present study. (3) Photosynthetic and morphological characters of C. microphylla were all negatively correlated with herbaceous aboveground biomass, though only Pn/Ci and length of first-year shoot were significantly correlated with it. This indicated that the difference in plant community was a factor making C. microphylla have different growth and physiological characters on different aspects and positions of slope. A number of studies showed that grazing of the herbaceous layer promoted the establishment and proliferation of woody species, and then led to grassland deterioration; but in arid and semi-arid ecosystems, some widely distributed shrub species like C. microphylla created resource islands and provide favorable microhabitat for grass species. In the present study, we found negative correlations between traits of C. microphylla and herbaceous aboveground biomass. We suggested that the removal of livestock grazing result in the decrease of the distribution C. microphylla and increase of grass coverage, and lead to the restoration of the typical steppe.