In the last two decades, two scholarly approaches, the "South China Studies School" and the "New Qing History", have made significant contributions to the study of late imperial Chinese history. The former developed from studies on southern China, and is focused on studying the ritual, organization and formation of Chinese society using materials collected through fieldwork. The latter views the Qing regime as both a Chinese and an Inner Asian empire, and explores parallels between the Qing and other early modem Eurasian empires using newly- available archival sources in both Chinese and non-Chinese languages (mainly Manchu). Though both schools have focused on the relationship between the margins of society and the state, the role of intermediate levels of authority has not been a main focus of concern. After Outer Mongolia submitted to the Qing Empire in 1691, Mongol- Han segregation policies were extended by the Qing government to Outer Mongolia. Despite the policy, some Han Chinese settlers (mostly merchants and farmers) in violation of Qing law married Mongol women, raised children, adopted Mongol ways of life, and managed to live peacefully with the Mongols in Mongolia. This paper focuses on these Mongolized Han Chinese settlers and their descendants. Drawing on Mongolian and Chinese sources, this paper delineates their background and life in Mongolia, demonstrating their changing legal status and culture, and emphasizing the critical role of the Great Shabi, the lay disciples of the Jibzundamba Khutugtu, in this process. This paper aims to explore the criteria that Han Chinese settlers and their offspring needed to meet in order to be accepted and integrated into the borderland society, and the limits of integration due to state policies and laws. We see how Han Chinese dealt with the local Mongol authorities beneath the central state and how even within the state they managed to evade state sanction and surveillance.