Nitrogen (N) and phosphorus (P) are key growth-limiting nutrients for organisms and their absolute and relative supplies regulate the structure and function of ecosystems. Landcover changes lead to modifications of terrestrial biogeochemistry, consequently influencing aquatic nutrient conditions. This study sought to evaluate the potential impacts of grassland degradation on nutrient availability and nutrient limitation in the Qinghai Lake (China) and its inflow streams. We sampled nutrient concentrations and tested stream nutrient limitation by conducting nutrient diffusing substrata (NDS) bioassays in streams flowing through subbasins with different grassland status. To test nutrient limitation and the responses of lake phytoplankton to stream inflows, bioassays were conducted by adding different nutrients (N, P, and joint NP) as well as water from different streams to lake water with phytoplankton, respectively. In general, N concentrations as well as N:P ratios decreased while P concentrations increased with decreased normalized difference vegetation index (NDVI, an index of vegetation status), especially in September, suggesting that grassland degradation (low NDVI) has the potential to differentially decrease N availability and increase P availability in streams. Consistent with this, relative responses (RR) of stream periphyton to P and combined NP enrichments in the NDS bioassays decreased with stream P concentrations while increased with stream water N:P ratios. Lake phytoplankton responded strongly to P and combined NP addition indicating strong P-limitation of lake phytoplankton. RR of lake phytoplankton to stream water decreased with nitrate concentration and N:P ratios in stream water and increased with the concentrations of ammonium, total phosphorus, and soluble reactive phosphorus, indicating that stream water with higher P but lower N and N:P from degraded subcatchments is associated with increased impact on P-limited Lake phytoplankton. Overall, this study suggests that grassland degradation has the potential to differentially influence the nutrients delivered to streams with substantial increases in P but decreases in N and N:P, alleviating P limitation of stream periphyton and, ultimately, stimulating P-limited phytoplankton growth in the lake.