Drought poses a significant environmental risk and can deeply affect the growth of grasslands. However, there is still uncertainty regarding the precise impact of varying levels of drought on grassland growth. To address this gap, we utilized several key indicators, including the Normalized Difference Vegetation Index (NDVI), Enhanced Vegetation Index (EVI), Global Orbiting Carbon Observatory-2-based Solar-induced Chlorophyll Fluorescence (GOSIF), and Gross Primary Productivity (GPP), in conjunction with drought indices (the Standardized Precipitation Evapotranspiration Index (SPEI) and soil moisture (SM). Our study aimed to comprehensively assess the consistency of spatiotemporal patterns in grassland vegetation and its responsiveness to different drought levels in the Inner Mongolia region from 2002 to 2020. The results indicated that NDVI, EVI, GOSIF, and GPP in grassland vegetation across Inner Mongolia exhibited significant increasing trends from 2002 to 2020. Specifically, NDVI, EVI, GOSIF, and GPP all displayed consistent spatial patterns, with 25.83%, 21.18%, 22.65%, and 48.13% of the grassland area showing significant increases, respectively. Drought events, as described through SPEI and SM, from June 2007 to September 2007 and June 2017 to July 2017 were selected to evaluate the response of grassland vegetation to drought. The drought events of 2007 and 2017 resulted in reductions in NDVI, EVI, GOSIF, and GPP relative to the multi-year average (2002–2020). GOSIF exhibited a more intense response to drought, suggesting that GOSIF may reflect the inhibition of water stress on grassland photosynthesis better than NDVI and EVI for the drought in 2007 and 2017. The reductions in NDVI, EVI, GOSIF, and GPP in grassland increased significantly across different drought levels, with the sharpest reductions observed during extreme drought. Under the severe and extreme drought events, the most substantial reductions in NDVI, EVI, GOSIF, and GPP were observed in the temperate steppe (TS). Moreover, the effects of different drought severity levels within the same grassland type varied, with the most significant reductions in NDVI, EVI, GOSIF, and GPP observed during extreme drought. Our results provide new perspectives for developing and implementing effective strategies to address grassland carbon cycling management and climate change in Inner Mongolia.