Distribution of shrubs expanding in grasslands – shrubification – is ongoing worldwide in grasslands and is common on the Qinghai–Tibetan Plateau (QTP). But the consequences of shrubification for plant carbon (C) input and fate in soil are unclear. We used 13C pulse labelling in a meadow on the QTP to compare photosynthetic capacity and photosynthate distribution in shoots, roots, soil and microbial functional groups between herbaceous plants (herbs) and shrubby Potentilla fruticosa. During 3 h of labeling in 13CO2 atmosphere, the 13C amount assimilated by shrubs (0.81 g C/m−2) was only 38 % of that by herbs. Over 8 days after labeling, 13C amount respired jointly by roots and soil microorganisms under shrubs (0.049 g m−2) was less than half of that under herbs. The mean residence time of 13C for respiration jointly by roots and rhizosphere microorganisms was longer under shrubs (0.61 day) than under herbs (0.44 day). Within 22 days after labelling, 13C amounts in roots, soil, and microorganisms were consistently smaller under shrubs than those under herbs. Consequently, shrub P. fruticosa had not only smaller photosynthetic potential, but also allocated less photosynthate belowground and slowed down C cycling in soil compared with herbs. The distribution of total 13C in microbial functional groups indicated by PLFA analysis was similar between herbs and shrubs. Averaged over vegetation patch types, gram negative bacteria and AMF accounted for 22 % and 4 % of the total microbial PLFAs in the 0–20 cm, respectively, but these two functional groups took up 51 % and 23 % of the total 13C absorbed by microorganisms, respectively. This indicates that gram negative bacteria and AMF are major consumers of rhizodeposits. Concluding, shrubification leads to smaller C allocation belowground and slows down C cycling in the soil.