In semi‐arid central Asia, relief has a strong impact on the distribution of vegetation and discontinuous permafrost. Our aim was to analyse causal chains and inter‐relationships that control the spatial patterns of forest and permafrost in the forest‐steppe of the northern Khangai Mountains in Mongolia. For this purpose, we conducted soil‐profile descriptions, ground‐penetrating radar sounding, and vegetation mapping to gain information about forest and permafrost distribution. We integrated remote‐sensing analysis and field‐mapping data, including soil properties, vegetation cover, forest fires and anthropogenic forest use. We developed and applied a technique for spatial delineation of permafrost distribution, based on the parameters Topographic Wetness Index (TWI), incoming solar radiation and Normalized Difference Vegetation Index (NDVI). Key outcomes of this study are that the occurrence of discontinuous permafrost within 1 m depth is limited to forest stands larger than 100 ha on north‐facing slopes. Dense ground vegetation supports permafrost, whereas sandy soil texture leads to greater depth of the permafrost table. As the seasonal ice in the active layer progressively melts down during summer, meltwater interflow above the permafrost table provides additional soil moisture downslope. This process is reflected in enhanced vitality of the steppe vegetation on toe slopes below forests with permafrost. This effect can in turn be used to indirectly detect permafrost in forest stands by remote sensing. Permafrost mostly disappears after forest fires and other severe disturbances, but it may re‐establish during forest regrowth. However, climate warming is presently leading to a loss of permafrost regeneration potential after disturbance, and to a shift from climate‐induced and ecosystem‐driven permafrost to entirely ecosystem‐protected permafrost. These trends will result in a further decrease of permafrost area after forest disturbance.