Description: Background and aims Fungi play vital roles in organic matter decomposition, and mineralisation of phosphorus and nitrogen, are significant plant and animal pathogens, and major mutualistic symbionts with the roots of higher plants. Despite their importance, relatively little is known about the effects of livestock grazing on different functional groups of fungi. Methods We used structural equation modelling to examine how grazing by domestic livestock and native herbivores, and aridity, plant cover and soil carbon influenced four functional groups of soil fungi (ectomycorrhizal fungi, arbuscular mycorrhizal fungi, dung saprobes, plant pathogens) from three microsites (tree, shrub, grass) at 54 woodland sites across 0.4 million km 2 of dryland in eastern Australia. Results Structural equation modelling showed that aridity influenced fungi indirectly by affecting different herbivores and by changing plant cover, which had different effects on different fungal groups. Rabbit grazing had a direct negative effect on ectomycorrhizal and arbuscular mycorrhizal fungi, most likely by disrupting hyphal networks through soil disturbance. Increased cattle grazing was directly positively associated with fungal dung saprobe abundance, and indirectly, negatively associated with dung saprobes by suppressing the positive effects of soil carbon. Sheep had direct and indirect negative effects on the abundance of plant pathogens. Conclusions Grazing was always an important predictor of the relative abundance of all fungal groups, either directly or indirectly. Thus, overgrazing is likely to have substantial effects on a range of important soil processes controlled by these microorganisms. Overall, our work indicates that increasing grazing, linked to on-going land use intensification to support a growing global population, will have major impacts on fungal functional groups.