In sheep transgenic for a sheep insulin-like growth factor 1 (IGF-1) cDNA driven by a mouse keratin promoter, we assessed wool production and properties in 51 adults of the first generation (G1) and in 56 lambs of the second generation (G2). Transgenic G1 sheep had an increased rate of wool production during spring and summer of year 2 compared with nontransgenic half-sibs, with a maximum increase of 17% in December, but during the winter nadir rates were similar. At second- and third-year shearing, however, fleece weights were not significantly different. There was a trend for transgenic animals to have coarser wool of lower staple strength. A controlled feeding trial revealed no significant differences in feed intake. The transgene was expressed not only in skin but also in a wide range of other tissues. Circulating IGF-1 concentrations were not significantly different between transgenic and nontransgenic animals, suggesting that local mechanisms were more important than systemic mechanisms for wool production, but were significantly higher in males than in females. In the G2 sheep, transgenic fleece weight did not differ significantly from nontransgenic either as lambs or at the end of the lamb year. Although the transgene was inherited in Mendelian fashion and was widely expressed, the production advantage seen in animals of the first generation did not persist in the second generation.