Microsatellites within the major histocompatibility complex (MHC) region have received increasing attention as proxy measures of the level of polymorphism at the Mhc genes themselves. We assessed the diversity of microsatellite loci within or in close proximity of the Mhc genes in several breeds of domestic sheep (Ovis aries) and the wild Mouflon (Ovis orientalis musimon). This was compared to variation at other microsatellite loci scattered throughout the sheep genome. Significantly higher number of alleles were observed at the MHC microsatellites. The sheep breeds studied fell into high- and low-diversity group. This grouping is not related to the agricultural use of the breeds, whether for milk, meat or wool. It is, however, correlated with the geographic origins of the breeds. Southern breeds are genetically more diverse than northern breeds. The observed heterozygosity was in most cases lower than Hardy-Weinberg expectations. The potential impact of selective breeding by man on this is discussed. Neutrality tests indicated that for most of the breeds, the distribution of alleles at the MHC-linked microsatellites are more even than would be expected if the genes were neutral and sampled from populations under drift-mutation equilibrium. Hitchhiking due to tight linkage with alleles at the MHC loci that are under balancing selection is proposed as a possible explanation for this pattern.