Snowmelt infiltration and soil thawing processes are essential for understanding surface and subsurface hydrology under the cold and arid climatic conditions found in grazed Inner Mongolia grassland soils. Over a 6-yr period (2004–2009), we evaluated the effects of winter grazing and freezing/thawing cycles on (i) soil hydraulic and thermal properties, (ii) the dynamics of field soil moisture and temperature, and (iii) the contributions of snowmelt and soil thawing to the summer water balance. Two adjacent contrasting sites were selected: a site that has been ungrazed since 1999 (UG99), and a site that has been grazed during the winter (WG). The results showed that the freezing/thawing cycles changed soil hydraulic and thermal properties. Associated with those freezing-induced changes, winter grazing decreased soil moisture by 5–10% throughout the whole year (October 2005 to September 2006), increased soil temperature by 1 to 3°C in summer, and decreased it by 2 to 5°C in winter. The grazed site with lower vegetation/snow cover and larger thermal conductivity had greater freezing rates and larger soil temperature fluctuations on a daily scale than the ungrazed site. Winter precipitation (snow + rainfall) contributed 15% of the total annual water balance for the UG99 site, but only 11% for WG site. We concluded that a detailed analysis of the spring snowmelt infiltration was critical for calculating seasonal water and energy balances in this region to fully understand the hydrological and ecological processes.