Sheep are among the first animals to have been domesticated by humans. Their history goes back to between 11,000 and 9,000 BCE, when humans domesticated the wild mouflon in ancient Mesopotamia. The first sheep were primarily raised for meat, milk, and skins. Woolly sheep began to be developed around 6000 BCE. They were then imported to Africa and Europe via trading.

The exact line of descent between domestic sheep and their wild ancestors is unclear. The most common hypothesis states that Ovis aries is descended from the Asiatic (O. orientalis) species of mouflon. A few breeds of sheep, such as the Castlemilk Moorit from Scotland, were formed through crossbreeding with wild European mouflon.

The urial (O. vignei) was once thought to have been a forebear of domestic sheep, as they occasionally interbreed with mouflon in the Iranian part of their range. However, the urial, argali (O. ammon), and snow sheep (O. nivicola) have a different number of chromosomes than other Ovis species, making a direct relationship implausible, and phylogenetic studies show no evidence of urial ancestry. Further studies comparing European and Asian breeds of sheep showed significant genetic differences between the two. Two explanations for this phenomenon have been posited. The first is that there is a currently unknown species or subspecies of wild sheep that contributed to the formation of domestic sheep. The second explanation is that this variation is the result of multiple waves of capture from wild mouflon, similar to the known development of other livestock.

One chief difference between ancient sheep and modern breeds is the technique by which wool could be collected. Primitive sheep can be shorn, but many can have their wool plucked out by hand in a process called "rooing". Rooing helps to leave behind the coarse fibers called kemps which are still longer than the soft fleece. The fleece may also be collected from the field after it falls out naturally. This rooing trait survives today in unrefined breeds such as the Soay and many Shetlands. Indeed, the Soay, along with other Northern European breeds with short tails, naturally rooing fleece, diminutive size, and horns in both sexes, are closely related to ancient sheep. Originally, weaving and spinning wool was a handicraft practiced at home, rather than an industry. Babylonians, Sumerians, and Persians all depended on sheep; and although linen was the first fabric to be fashioned into clothing, wool was a prized product. The raising of flocks for their fleece was one of the earliest industries, and flocks were a medium of exchange in barter economies. Numerous biblical figures kept large flocks, and subjects of the king of Judea were taxed according to the number of rams they owned.

Sheep were among the first animals to be domesticated by humans (although the domestication of dogs may be over 20,000 years earlier); the domestication date is estimated to fall between 11,000 and 8,000 BCE in Mesopotamia. They may have been domesticated independently in Mehrgarh in South Asia (in present-day Pakistan) around the 7th millennium BCE. Their wild relatives have several characteristics, such as a relative lack of aggression, a manageable size, early sexual maturity, a social nature, and high reproduction rates, which made them particularly suitable for domestication. Today, Ovis aries is an entirely domesticated animal that is largely dependent on humans for its health and survival. Feral sheep do exist, but exclusively in areas devoid of large predators (usually islands) and not on the scale of feral horses, goats, pigs, or dogs, although some feral populations have remained isolated long enough to be recognized as distinct breeds.

The rearing of sheep for secondary products, and the resulting breed development, began in either southwest Asia or western Europe. Initially, sheep were kept solely for meat, milk and skins. Archaeological evidence from statuary found at sites in Iran suggests that selection for woolly sheep may have begun around 6000 BCE, and the earliest woven wool garments have been dated to two to three thousand years later. Before this, when a sheep was slaughtered for its meat, the hide would be tanned and worn as a kind of tunic. Researchers believe that the development of such clothing encouraged humans to live in areas far colder than the Fertile Crescent, where temperatures averaged 70 °F (21 °C). Sheep molars and bones found at Çatalhöyük suggest that populations of domestic sheep may have been established in the area. By that span of the Bronze Age, sheep with all the major features of modern breeds were widespread throughout Western Asia.

The residents of the ancient settlement of Jeitun, which dates to 6000 BCE, kept sheep and goats as their primary livestock. There have also been numerous identifications of Nomadic pastoralism in archaeological sites, identified by a prevalence of sheep and goat bones, a lack of grain or grain-processing equipment, very limited architecture showing a set of characteristic traits, a location outside the region's zone of agriculture, and ethnographic analogy to modern nomadic pastoral peoples.

There is a large but constantly declining minority of nomadic and seminomadic pastoralists in countries such as Saudi Arabia (probably less than 3%), Iran (4%), and Afghanistan (at most 10%).