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Mongolian pastoralism, a vital traditional livelihood, faces challenges from increasing livestock numbers, grassland degradation, and socio-economic disparities. This study explores the relationships between biomass, stocking density, and livestock-based income among Mongolian pastoralists, using a pooled dataset from socio-economic surveys and ecological data from 2010 to 2019. A two-stage least squares (2SLS) regression framework is employed, with biomass as an instrumental variable for stocking density. The results reveal that biomass positively correlates with stocking density, while stocking density is negatively associated with net income, suggesting overgrazing and heightened resource competition. Other variables such as livestock number and household size are positively associated with net income, highlighting their critical role in sustaining pastoral livelihoods. Cluster analysis further shows variations based on biomass and income levels. Low-biomass regions rely more on cashmere yield, while high-biomass regions face constraints due to competing land uses. Wealthier households managing larger herds can mitigate income losses, whereas poorer households experience more significant losses due to weakness in competition. Policy recommendations include regulating livestock numbers to prevent overgrazing and promoting cashmere productivity in low-biomass regions. Future research should focus on dynamic panel data analyses and policy evaluations for sustainable livestock management.