Polylepis forests represent one of the most endangered high mountain ecosystems in South America. Therefore, it is necessary to inform local nurseries of the best soil inoculum to grow healthy and strong P. australis seedlings for forest restoration purposes. Arbuscular mycorrhizal fungi (AMF) affect plant performance and plants respond differently to them. Previous studies show that the best AMF source is from non-degraded P. australis forests. However, inoculum from degraded areas has never been tested. The response of P. australis seedlings to inoculation with soils from four sites differing in livestock-associated forest degradation and the identification of root-colonizing of AMF species were evaluated. Natural soils inoculum was collected within the Sierras Grandes Mountain range in central Argentina and belongs to degraded grassland, degraded P. australis forest, intermediate degraded and non-degraded P. australis forests. The samples were described with regard to AMF diversity, soil characteristics, and mycorrhizal inoculum potential. The AMF species diversity and the soil infectivity were high in the degraded forest. Contrary to our expectations, the most advantageous AMF inoculum for promoting the shoot growth of P. australis seedlings in production facilities was sourced from degraded soils (forest and grassland). Seven AMF species were trapped by P. australis root plants and six of them were found in degraded forest soils. Only two AMF species, Septoglomus constrictum and Gigaspora sp., were found to be restricted to degraded forest. These data suggest that degraded forest soils provide the most effective inoculum for promoting sapling growth in a greenhouse setting.