Shrub encroachment, i.e., shrub emergence or an increase in woody plant cover, has been widely observed in arid and semiarid grasslands and savannas worldwide since the 2000s. However, until now, there has been a clear division of opinion regarding its ecological implications. One view is that shrub encroachment is an indicator of ecological degradation, and the other is that shrub encroachment is a sign of the restoration of degraded ecosystems. This division leads to completely different judgments about the states and transition phases of shrub-encroached ecosystems, which further affects decisions about their conservation and management. To determine whether ecosystems experiencing shrub encroachment are degrading or are in a postdegraded restoration stage, the spatial distributions and interactions of woody plants after shrub encroachment were investigated in this study. An Ulmus pumila-dominated temperate savanna-like ecosystem with significant shrub encroachment in the Otindag Sandy Land, Inner Mongolia, China, was selected as the research area, and woody plants were surveyed within a 25-hectare (500 × 500 m) plot. Spatial point pattern analysis was employed to analyze the distribution patterns of the woody plants. The results indicated different patterns for U. pumila trees, i.e., a random distribution pattern for old trees (with a diameter at breast height (DBH) of more than 20 cm) and aggregated distribution patterns for medium (5 cm ≤ DBH < 20 cm) and juvenile trees (DBH < 5 cm) at scales of 0–9 and 0–12 m, respectively. For most shrubs, there was significant aggregation at a scale of 0–6 m. However, there were significant negative relationships between old U. pumila trees (DBH ≥ 20 cm) and most shrub species, such as Caragana microphylla and Spiraea aquilegifolia. In contrast, there were positive relationships between juvenile trees (DBH < 5 cm) and most shrub species. These results suggest that, to some extent, shrub encroachment may have disrupted the normal succession pattern in the U. pumila community in this area, and without conservation, the original tree-dominated temperate savanna-like ecosystem may continue to deteriorate and eventually become a shrub-dominated temperate savanna-like ecosystem.