Accurate estimation of green aboveground biomass in arid and semiarid grassland is essential for a variety of studies, such as sustainable grassland management, fire risk assessment, climate change, and environmental degradation. A great need exists for the establishment of robust method for estimating green aboveground biomass in arid and semiarid grassland due to the influences of soil background and litter. In the study, a new index (litter-soil-adjusted vegetation index, L-SAVI) was proposed to estimate green aboveground biomass in arid and semiarid grassland. The L-SAVI was also evaluated based on biomass and spectra in situ measurements in the desert steppe of Inner Mongolia. Results showed that, the performance of the new index was better than that of NDVI (normalized difference vegetation index), SAVI (soil-adjusted vegetation index), MSAVI (modified soil-adjusted vegetation index), OSAVI (optimised soil-adjusted vegetation index), TSAVI (transformed soil-adjusted vegetation index), ATSAVI (adjusted transformed soil-adjusted vegetation index), PVI (perpendicular vegetation index), GSAVI (green-adjusted vegetation index), and L-ATSAVI (litter-corrected ATSAVI) in our study site. The logic behind the L-SAVI was to enable the SAVI to be less sensitive to litter by incorporating the CAI (cellulose absorption index) in the SAVI. In conclusion, the L-SAVI is a suitable predictor for complementing existing vegetation indices on green aboveground biomass estimation in arid and semiarid grassland.