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Droughts cause both major financial losses to society as well as environmental damage, especially in arid and semi-arid regions, where the economy relies upon rainfed pastoralism and cultivation. Droughts are becoming increasingly frequent and intense with ongoing global climate change. Moving from a reactive to a preventative mode of drought response is the key to minimizing drought-related economic and environmental costs, and drought hazard analysis is becoming increasingly important. Xilingol League, in Inner Mongolia, consists of typical steppe and is seriously affected by drought. In this study, we conducted a drought hazard analysis based on two drought indices, the precipitation anomaly percentage (Pa) and the standardized precipitation evapotranspiration index (SPEI), using data from a series of meteorological monitoring stations from across the region. The drought hazard values were used to define zones which were divided into five levels using a natural break-point. Of the two indexes, Pa was found to be the more effective and the corresponding drought hazard map resembles the spatial distribution of precipitation, decreasing from northwest to southeast. Improving awareness of livestock farmers to drought risk is important for disaster mitigation and we propose that drought hazard-based insurance can play an important role. Finally, we propose a series of drought adaptation measures to reduce the possibility and intensity of drought, both in theory and in practice. Our results potentially provide improved insights into the drought hazard and may be helpful in developing appropriate adaptation and mitigation strategies to cope with the adverse effects of drought.