Human impact and fragmentation often have negative effects on plant population sizes. This can lead to declining genetic diversity due to restricted gene flow and genetic bottlenecks, and eventually result in reduced reproductive fitness. Environmental conditions can also influence the genetic structure of populations and directly affect their reproduction success. For Stipa pennata, the key species of largely natural steppes in southern Siberia, using AFLP we tested whether genetic variability and germination are negatively influenced by fragmentation, and assessed the influence of local environmental conditions. Genetic diversity was moderately high (mean percentage of polymorphic bands = 38.4%), with high genetic differentiation occurring between populations (Φ_ST = 0.547). Genetic variation was mainly partitioned (41.8%) between two distinct grassland types. Isolation negatively affected genetic diversity, highlighting that fragmentation had an impact on genetic structure. Higher mean precipitation negatively influenced population size, population density and genetic diversity. The speed of seed germination was correlated positively with population size and negatively with vegetation cover, while we found no evidence for negative effects of low genetic diversity on percentage of seed germination. The presence of different genetic groups shows that populations have adapted to a range of environments. Germination speed also differed between groups, as a consequence of maternal effects or of adaption to certain environmental conditions. Our results show that fragmentation can have potentially strong effects even in natural grasslands. We recommend that any future restoration schemes take the observed pronounced genetic differentiation into account.