Direct investigations of carbon exchange by grassland vegetation along elevation gradients from 620m a.s.l. to 1960m in the Alps were undertaken in the Berchtesgaden National Park, Germany and in Stubai Valley, Austria during 2002 and 2003, focusing on vegetation development in response to seasonal change in climate, where vegetation is not immediately influenced by grazing activity. The data were analyzed via model inversions with an empirical hyperbolic light response model and a physiological carboxylase-based process model. Differences were found in ‘high’ versus ‘low’ elevation sites in photosynthetic and respiratory capacity as well as their relationship to temperature environment and vegetation structure. Differentiation of the grassland types, which has a parallel in observations of grassland gas exchange worldwide as illustrated for the network projects CarboEurope and AmeriFlux, apparently depends on land use management, climate stress, nitrogen availability and plant community composition and dynamics. The importance of developing a better understanding of the observed differences or shifts in grassland ecosystem behavior in the context of assessing landscape, regional and continental scale water and carbon balances is discussed. The utility and need for simultaneous study of grasslands via eddy covariance and chamber methodologies, for parallel analysis of data with different models, and for supplementing field gas exchange observations with ancillary measurements of leaf structural and chemical composition in order to achieve new insight is emphasized.