Global warming is expected to affect the arctic harsher than other regions of the globe. Many plant species will face conditions that contradict their adaptations in a warming climate. Changes in habitat can lead to drastic changes in biodiversity as well as exerting a strong selective pressure for plants to evolve and adapt quickly. Herbivore grazing in the arctic also affects plant ecosystems e.g. by lowering biodiversity and changing species composition and may influence their response to warming. The aim of this study was to examine whether grazing influences plants’ adaptation to rising temperatures. Geothermally warmed areas have been used as in situ proxy systems for effects of warming climates on ecosystems. Grændalur, a geothermally warmed valley in southwest Iceland, was used as a study site to explore the effects of warming and grazing on ecosystems. Three soil temperature gradient transects were established there and each transect has six fenced-off plots, at different soil temperatures (ambient +0, +1, +3, +5, +10 and +20°C), and paired plots outside the fence that were grazed by sheep. Species richness, evenness, Shannon-Wiener and Simpson’s diversity, species cover, and composition as well as plant height were measured in these plots inside and outside the fence. In addition, flowering and vegetative Ranunculus acris (meadow buttercup) individuals were counted in each plot to assess grazing effects on flowering success. Grazing did not influence the plant community response to warming. Rising temperature decreased species richness and both Shannon-Wiener and Simpson’s diversity, and drove changes in community composition. Plant height increased with rising temperatures but decreased with grazing. Grazing also significantly reduced R. acris flowering. These results highlight the need for sustainable grazing management in Iceland, as well as the significance global warming has for plant communities.