Shrub species have increased in density and cover in desertification areas, however, the role of sandy habitats in contributing to the expansion of shrubs is poorly understood. Although the effect of sandy habitats on plant growth and reproduction have been demonstrated, most existing studies lack either experimental demonstration or an integrated study during the whole shrub life cycle. We performed field and laboratory experiments to examine the responses of four stages in the life cycle of shrubs (seed germination, plant growth, seed reproduction, clonal reproduction) to sandy habitats (including sand substrate, sand burial and wind erosion) for Caragana shrubs. Results showed that both sand substrate and sand burial facilitated seed germination, seedling biomass, sapling establishment, plant growth, and root-shoot ratio of Caragana. Meanwhile, they both strongly increased seed number and seed preservation, and thus enhanced sexual reproduction. Sand burial favored clonal reproduction of Caragana by promoting the formation of branch-derived ramets, while wind erosion benefited clonal reproduction by facilitating the formation of root-derived ramets. These results suggested that sandy habitats facilitated seed germination, plant growth, sexual reproduction, and clonal reproduction of Caragana, which could explain why shrub abundance, shrub area and shrub height of Caragana in sandy areas was higher than in grasslands. Our study provided an experimental demonstration that sandy habitats promoted the population growth of Caragana shrubs during the whole life cycle and highlighted the significant role of sandy habitats in facilitating shrub encroachment in grasslands.