WildEarth Guardians, which is dedicated to conservation in the American West, said retiring grazing permits was an effective way to resolve grazing conflicts.
Interior head Ken Salazar last week announced a series of proposals for future wild horse management, including plans to establish up to seven new horse preservation areas on more productive land further east, to take pressure off the arid and delicate western rangelands.
However, WildEarth Guardians criticised Salazar for failing to recommend voluntary grazing permit retirement, among other strategies, as a way to reduce livestock grazing conflicts with free-roaming horses and burros and native wildlife on public lands.
"Public lands grazing is permitted all over the West, and it's nearly impossible for displaced wildlife to escape the impacts of domestic livestock production," said Mark Salvo, the group's grazing programme specialist.
"Any proposal to improve horse and burro management in the West should include removal of domestic livestock from public lands to make way for horses and burros and wildlife."
The group said millions of domestic cattle, sheep, horses and goats are permitted to graze more than 260 million acres of public land in the West. It says Salazar's department cannot "ignore the continued harmful impacts of domestic livestock grazing in its efforts to protect sensitive public lands".
WildEarth Guardians recently issued a report, Western Wildlife Under Hoof, documenting the effects of livestock grazing on native wildlife and ecosystems across the western US.
The Omnibus Public Land Management Act of 2009, enacted last April, allows ranchers to permanently retire their grazing permits on select public lands in Oregon and Idaho in exchange for compensation.
"Voluntary grazing permit retirement is an ecologically imperative, economically rational, and politically pragmatic way to address grazing conflicts on public lands," Salvo said.
A recent survey of public land ranchers in Nevada - the state with the most free-roaming horses and burros - indicates that as many as half are interested in retiring their grazing permits for compensation.