We analyzed the variation of plant composition, forage production, and livestock diet across a broad stocking rate gradient on Eastern Hills rangelands of Uruguay. Our approach encompassed five ranches subjected to mixed sheep-cattle grazing and combined field surveys, microhistological fecal analysis, and remote sensing techniques. We hypothesized that selectivity would decrease as stocking rate increased. Vegetation data and fecal samples were obtained in 17 paddocks in 2008. To investigate the role of stocking rate on vegetation, we focused on dominant species and forage type cover. Diet composition was analyzed at forage type level. Annual net primary productivity was estimated for each paddock using the normalized difference vegetation index derived from the MODIS (Moderate Resolution Imaging Spectroradiometer) sensor. We found a clear relationship between the variation in stocking rate and floristic and forage type composition, both suggesting a deterioration of grassland conservation status. Cool season grass cover varied from 25% to 5%, from low to high stocking rates. Dicot cover showed an opposite trend, with values around 15% in the low and moderate stocking levels and reaching 35% on high-stocked paddocks. Diet composition and diet overlap between herbivores also showed clear patterns of response to stocking rate. On the other hand, livestock selectivity interacted with herbivore type. While cattle showed the expected pattern, sheep did not decrease selectivity in winter as stocking rate increased. Contrary to expectations, annual net primary productivity was similar across the different stocking rate levels and the month of maximum productivity was generally March. Our study provides strong evidence of marked rangeland degradation; however, the lack of response in terms of ANPP and the ability of sheep to maintain selectivity under high stocking rates could help to explain the lack of responsiveness in the adoption of generalized stocking adjustments by the ranchers.