Grazing and fire are both independently important drivers of plant community dynamics; however, their interactive effects may be even more influential. Little is known about prefire grazing effects on postfire plant community dynamics. We investigated the effects of dormant-season, moderate prefire grazing by cattle on postfire plant community response in the imperiled Artemisia (sagebrush) steppe. Treatments were moderately grazed or not grazed by cattle for 5 yr before fire. The first yr post fire, shrub density was 4 × greater in grazed areas, demonstrating fire-induced mortality was reduced with grazing. This further suggested that grazing reduced fire severity and postfire large bunchgrass biomass was greater in grazed compared with ungrazed areas. Biomass and abundance of the exotic annual grass, Bromus tectorum L., were substantially greater and plant diversity was lower in ungrazed compared with grazed areas post fire. Five years post fire, perennial herbaceous vegetation still dominated prefire-grazed areas, but ungrazed areas were dominated by B. tectorum, suggesting that a novel ecosystem state had developed. Substantial increases in B. tectorum are concerning because it prevents recruitment of native perennial plants and increases fire frequency, which would further decrease diversity and reinforce an exotic annual-dominated state. Lower diversity in ungrazed areas post fire is concerning because diversity can be important for plant community stability. The importance of livestock as ecological engineers through their influence on fire has largely been overlooked but is clearly substantial and needs to be integrated into conservation and management plans.