This paper analyses the present state of sheep farming in Serbia and provide guidance for sustainable development in the future. It also discusses the challenges of the modern age that may affect the viability of sheep production. Today in Serbia grows less than 1.5 million sheep. In terms of breed structures, most of the population makes indigenous Pramenka sheep (80%), while the remaining 20% are: Tsigai, Merinolandschaf, Ile de France, Pirot improved, Mis sheep, and other less important population, as well as the crossbreed with foreign and local domestic sheep. However, due to the intense process of industrialization, from the second half of the twentieth century until today there is a trend of depopulation, demographic discharge of the village, which has resulted in reducing the farms so that the number of sheep in the past two decades fell by about 30%. The greatest reduction in the number of sheep registered in the nineties. After stabilization, a large decrease in the number of sheep was followed by the 2010^th year and by 6% compared to 2008 year. Genetically improvement is significantly increased level of production of all species of domestic animals. However, animals selected for high and efficient production are exposed to greater risk. This primarily refers to the physiological and immunological problems, but would generally be said that all this leads to distortion of harmony between the organism and the environment and the repercussions on the molecular level. Sustainable development of sheep breeding in Serbia must be kept in mind this reality. New challenges facing the sheep breeding of Serbia, stems from a political orientation toward membership in the European Union. Sheep Serbia must find its place in this new challenge.