Grassland managements can affect carbon (C) and nitrogen (N) storage in grassland ecosystems with consequent feedbacks to climate change. We investigated the impacts of compound fertilization and clipping on grass biomass, plant and soil (0–20 cm depth) C, N storage, plant and soil C: N ratios, soil microbial activity and diversity, and C, N sequestration rates in grassland in situ in the National Dalaoling Forest Park of China beginning July, 2011. In July, 2012, the fertilization increased total biomass by 30.1%, plant C by 34.5%, plant N by 79.8%, soil C by 18.8% and soil N by 23.8% compared with the control, respectively. Whereas the clipping decreased total biomass, plant C and N, soil C and N by 24.9%, 30.3%, 39.3%, 18.5%, and 19.4%, respectively, when compared to the control. The plant C: N ratio was lower for the fertilization than for the control and the clipping treatments. The soil microbial activity and diversity indices were higher for the fertilization than for the control. The clipping generally exhibited a lower level of soil microbial activity and diversity compared to the control. The principal component analysis indicated that the soil microbial communities of the control, fertilization and clipping treatments formed three distinct groups. The plant C and N sequestration rates of the fertilization were significantly higher than the clipping treatment. Our results suggest that fertilization is an efficient management practice in improving the C and N storage of the grassland ecosystem via increasing the grass biomass and soil microbial activity and diversity.