Aridity and intensive grazing have been confirmed to affect the facilitative effects of dryland shrubs. However, their combined effects on plant-plant interactions have rarely been tested. To test how these two factors affect relations between plants, we analyzed 144 plots (under shrub canopy vs. open areas) at 12 sampling areas established in the conditions of two grazing regimes (high grazing vs. low grazing intensity) and two different climatic regions (arid vs. semi-arid) in northeastern Iran. A dominant shrub, Artemisia kopetdaghensis, was selected as the model species. Further, we studied changes in plant life strategies along the combined grazing and aridity stress gradients. We used relative interaction indices to test the outcomes of plant-plant interactions, calculated for species richness, Shannon diversity and species abundances. Then we compared them using linear mixed-effect models (LMM). The indicator species analysis was used to identify species typical for the under-canopy of shrub and for the adjacent open areas. The combination of stress factors affected the type and intensity of plant-plant interactions and plant life strategies (CSR) of the indicator species. Artemisia kopetdaghensis showed the highest facilitation effect under the most intensive stress conditions (high aridity/high grazing), which turned into competition under the low stress conditions (low aridity/low grazing). In the arid region, the canopy of shrub protected ruderal annual forbs and grasses with SR and R-strategy, respectively, in both high (high aridity/high grazing) and low grazing intensity (high aridity/low grazing). In the semi-arid region and high grazing intensity (low aridity/high grazing), the shrubs protected perennial forbs with C-strategy. Our FINDINGS highlight the importance of context-dependent shrub management in the restoration of vegetation damaged by intensive grazing.