Sheep farming in Serbia plays an important role in the preservation of rural communities, cultural heritage and landscapes. However, depopulation, declining flock sizes and pressure from imports require a shift to sustainable models. This paper presents integrated approaches combining environmental, economic and social principles and focus on product quality and environmental responsibility. The study includes a literature review, and interviews with farmers. The results show that appropriate genotypes, rotational grazing, renewable energy and value-adding strategies such as certification, branding and agritourism improve both environmental sustainability and market competitiveness. Indigenous sheep breeds are superior to imported ones in grazing systems as they offer better adaptability, resource efficiency and linkage with traditional products. Rotational grazing reduces winter feed and fertilizer costs by up to 40%, while the average daily gain in European systems reaches ~193 g/day. Pasture-raised meat has a higher omega‑3 content (up to 146 mg/100 g). Solar and biogas systems improve energy self-sufficiency and reduce emissions. Innovative uses for wool support the goals of the circular economy. Sustainable sheep farming is therefore a viable model for resilient, market-oriented rural development.