Tea tree oil (TTO) from the Australian native plant Melaleuca alternifolia has wide ranging bio-active properties, including insecticidal and repellent activity against arthropods. Furthermore, composition of commercially available Australian TTO is specified under an International Organization for Standardization standard (ISO 4730), reducing the potential for variable effects often noted with botanical pesticides. The effect of TTO, meeting the ISO standard for terpinen-4-ol chemotype, was tested against sheep lice (Bovicola ovis Schrank) in a series of laboratory studies. Immersion of wool for 60s in formulations containing concentrations of 1% TTO and above caused 100% mortality of adult lice and eggs. Exposure to vapours from TTO, delivered as droplets in fumigation chambers and when applied to wool also caused high mortality in both lice and eggs. The main active component of TTO in the fumigant tests was terpinen-4-ol. Treated surface assays and tests with wool where the formulation was allowed to dry before exposure of lice indicated low persistence. These studies demonstrate that TTO is highly toxic to sheep lice and active at concentrations that suggest potential for the development of TTO-based ovine lousicides.