Understanding the importance of grassland management is crucial for predicting the effects on forage production, pasture and ecosystem stability. Studies about the impact of grassland management in temperate humid environments on soil, erosion and aboveground biomass properties are lacking. This study investigates the effect of different grassland managements—no grazing, moderate grazing and heavy grazing—on soil properties, hydrological responses and herbage quality in an organic farm located in Croatia. The results showed that heavy grazing significantly increased soil compaction, structural deterioration, erosion and nutrient transport compared with no grazing. Heavily grazed plots had significantly higher soil organic matter and nutrient concentrations compared with no-grazing plots. Moderately grazed plots had the highest biomass production and the herbage with higher quality compared with other treatments. Significantly higher ash contents on heavily and moderately grazed plots were due to cow trampling. Cow grazing behaviour was a more important factor for plant regrowth and herbage quality than soil properties. Moderate grazing did not induce serious soil erosion problems or reduce soil productivity. Soil conservation measures should focus only on the heavily grazed areas and include the introduction of rotational grazing in combination with various strategies: excluding grazing, reseeding and increasing the diversity of resting areas.