In Europe, the conservation of extensively grazed semi-natural grasslands is addressed by agricultural policies whose effectiveness is questioned. We studied sub-xerophilous Bromus erectus semi-natural grasslands to analyse the interactions among: i) agri-environmental payments, ii) grazing regimes, iii) environmental conditions, iv) habitat conservation state, and v) forage yield and quality. We sampled 98 plots across 19 farms and unmanaged control areas in five regions encompassing Italy and Switzerland. We fitted two piecewise structural equation models (SEM) to infer direct and indirect effects of agri-environmental payments, grazing regimes and environmental conditions on proxies of habitat conservation state, (i.e., the number and cover of diagnostic species), and forage yield and quality (i.e., specific leaf area - SLA, leaf dry-matter content - LDMC, sward height and pastoral value). Agri-environmental payments contributed to maintain grazing management and in turn to preserve the habitat biodiversity and functions. Payments did not affect stocking rates, but determined a more even distribution of grazing intensity, with positive effects on habitat conservation state and negative outcomes for LDMC. Conversely, LDMC increased with stocking rates. Among environmental condition, elevation and soil carbonates content had a positive effect on the habitat conservation state, while slope exerted only indirect effects on forage quality and diagnostic species by reducing fine-scale grazing intensity. Overall, the effectiveness of payments largely depended on the scale of measures' implementation. Farm-level grazing contracts and periodic field monitoring would allow to influence the fine-scale grazing intensity and to implement a result-oriented approach towards the objectives of the post-2020 CAP.