Transgenic sheep were produced by pronuclear microinjection with a mouse ultra-high-sulfur keratin promoter linked to an ovine insulin-like growth factor 1 (IGF1) cDNA. Five transgenic lambs resulted from the microinjection of 591 embryos; one male and one female showed IGF1 expression in the skin. A progeny test of the ram was carried out by matings to 43 non-transgenic ewes. Of 85 lambs born, 43 (50.6%) were transgenic. At yearling shearing (approximately 14 months of age), clean fleece weight was on average 6.2% greater in transgenic animals than in their non-transgenic half-sibs, with a greater effect in males (9.2%) than females (3.4%). Transgenics showed a small but significant increase in bulk, but male transgenics had a lower staple strength than female transgenics and non-transgenics which did not differ significantly. There were no significant differences in fiber diameter, medullation, and hogget body weight. To our knowledge this is the first reported improvement in a production trait by genetic engineering of a farm animal without adverse effects on health or reproduction.