Much of the peatland vegetation in Shetland shows evidence of grazing modification, and peat erosional features are widespread. This paper examines the relationship between these phenomena and the stocking levels imposed by the common grazing regulations, in the context of historical changes in stocking regimes and other local factors relating to shareholder behaviour. An hypothesis is developed which accounts for the distribution of modified peatland vegetation. In the absence of detailed ecological studies on the effects of grazing on blanket bog vegetation in Shetland, studies elsewhere in the UK are used to define biologically sustainable stocking levels on Shetland peatland. When these levels are compared with those set under the terms of the Grazing Regulations, the Regulation stocking rates are shown to be generally above those which would be considered as being biologically sustainable. Some of the possible reasons for the stocking levels originally being set too high are examined, and the potential importance of subsequent changes in grazing regimes to increasing overgrazing risk is highlighted. It is argued that if these observations are correct then the current legislation which regulates grazing entitlement according to fixed stocking levels needs to be reappraised. It is suggested that, in order to avoid future degradation of the peatland resource, a more appropriate method for setting and regulating stocking on the common grazings is developed. © 1990, Taylor & Francis Group, LLC.