China has implemented forest policies and expanded protected areas to halt deforestation and protect giant panda habitats. These policies simultaneously encouraged local communities to raise livestock that then freely range in forests. This grazing had unintended consequences. As an alternative livelihood, it has become the most prevalent human disturbance across the panda's range. How do free-ranging livestock impact giant panda habitats and what are the implications for future conservation and policy on a larger scale? We use Wanglang National Nature Reserve as a case study. It has seen a nine-fold livestock increase during past 15 years. We combined bamboo survey plots, GPS collar tracking, long-term monitoring, and species distribution modelling incorporating species interaction to understand the impacts across spatial and temporal scales. Our results showed that livestock, especially horses, lead to a significant reduction of bamboo biomass and regeneration. The most intensively used areas by livestock are in the valleys, which are also the areas that pandas prefer. Adding livestock presence to predictive models of the giant panda's distribution yielded a higher accuracy and suggested livestock reduce panda habitat by 34%. Pandas were driven out of the areas intensively used by livestock. We recommend the nature reserve carefully implement a livestock ban and prioritise removing horses because they cause the greater harm. To give up livestock, local communities prefer long-term subsidies or jobs to a one-time payment. Thus, we recommend the government provide payments for ecosystem services that create jobs in forest stewardship or tourism while reducing the number of domestic animals.