The Yarkand hare, Lepus yarkandensis, is an endemic, endangered species restricted to the Tarim Basin of the Xinjiang Uygur Autonomous Region, China. The Yarkand hare is distributed in scattered oases which are physically isolated by the desert. Its natural fragmentation habitat makes it an ideal object for studying effect of habitat fragmentation on its genetic structure. To evaluate the effects of habitat fragmentation on genetic diversity of the species, we assessed genetic diversity for 20 sampling populations based on control region and Cytb markers. Relatively low levels of gene diversity are found in most of isolated populations in the southern margin of the Taklamakan Desert. Furthermore, a positive correlation is found between gene diversity and the size of historical effective population. Significant genetic differentiation is detected among most populations by pairwise F ST analyses, which is characterized by an isolation by distance pattern. Additionally, the AMOVA results show highly significant population structure among seven geographical groups. High migration rates are found among continuous populations, while very low levels of migration rates are found among the relatively isolated populations, suggesting that the desert may make an effective barrier against gene flow. Finally, the control region shows four clades by the phylogenetic analyses, three of which are present in nearly all sampling populations. The observed pattern of the lineage mixing, also shown by the Cytb data, may be caused by extensive gene flow among populations, and could be explained by possible demographical expansion of the Yarkand hare during the late Pleistocene interglacial period.