The degradation of alpine grasslands directly affects their ability to conserve water, but changes in soil water storage in grassland under different degrees of degradation are poorly understood. Here, we selected four grassland plots along a degradation gradient: no-degradation grassland (NG), lightly degraded grassland (LG), moderately degraded grassland (MG) and severely degraded grassland (SG). We then applied an automatic soil moisture monitoring system to study changes in soil water storage processes. Results revealed significant (p < 0.05) differences in soil water storage among NG, LG, MG and SG. Specifically, LG lost 35.9 mm of soil water storage compared with NG, while soil water storage in LG, MG and SG decreased by 24.5%, 32.1% and 36.7%, respectively. The shallow groundwater table, air temperature and grass litter were the key controlling factors of soil water storage in the grassland. Grazing and future global warming will significantly reduce soil water storage in alpine grasslands.