Sheep are passive mobs fround throughout the Overworld, though they can only spawn on grass and only in light of level 9 or higher. Killing a sheep will cause it to drop 1 piece of wool and experience orbs worth a total of 1-3 experience points, however, shear a sheep will give you 1-3 pieces of wool. Once sheared the sheep will (eventually) eat grass and regain its wool, so you can shear it again. Sheep are most likely the only mob you don’t want to kill, as they could be worth more to you alive.
Sheep can spawn in several different colours, ranging from several shades between black and white, brown and very rarely a pink sheep may spawn. They can spawn in groups of 3-8, though several smaller groups can often be found near each other.
Sheep can also be dyed by right clicking them while holding dye. Shearing a sheep will not cause it to lose it’s colour, however, all sheared sheep look the same. This allows you to farm all wool colours easily by simply having 1 sheep of each colour and shearing them occasionally. This makes it easier to farm larger quantities of harder to obtain wool colours, like brown or shades of blue, which require cocoa beans and lapis lazuli.
When farming sheep for their wool, be warry of wolves as they will kill any sheep they can find. So keep your field of sheep away from any biome that can spawn a wolf, you wouldn’t be the first to return to your farm only to find out a wolf spawned inside your sheep stables, killing every single one of them.
Like almost all passive mobs, sheep can be bred using wheat and will thus follow you if you walk passed them while holding wheat in your hand. Different coloured sheep can be bred, which will result in a baby sheep with the colour of one of the parent sheep. Baby sheep will not spawn as a mix of the parent’s colours.