Abstract: With the deepening of market-oriented reform and the state’s emphasis on ecological environment, the income structure and inequality of herdsmen have changed significantly. Based on a fixed-point tracking survey data of Inner Mongolia, this paper analyzes the income distribution of herdsmen by calculating the Gini coefficient and the Theil index and emphatically discusses the impacts of market factors and government ecological and environmental policies on the income inequality of herdsmen. Results show that the Gini coefficient was not much different from that of domestic residents and fluctuated with the highest value of 0.47 and the lowest value of 0.41. Animal husbandry income was still the main contributing factor to the income inequality, but the degree of influence was gradually decreasing. The contribution of non-animal husbandry income and transfer income to inequality was increasing rapidly, among which animal husbandry income and non-animal husbandry income played big roles in widening the gap, while transfer income played a role in narrowing the gap. In addition, the largest contribution to the non-pastoral income inequality was wage income, which tended to increase; grassland ecological compensation income contributed the most to the degree of transfer income inequality, which also helped to narrow the gap. The main contribution of regional differences in pastoral income came from intra-regional disparities, indicating that the income inequality within the various cities was more pronounced. In the future, the non-pastoral employment channels of herders should be furtherly expanded, and the income inequality should be reduced in the process of increasing income; at the same time, the continuous implementation and structural adjustment of the grassland ecological compensation policy must be continuously strengthened.