3The livestock sector is the largest agricultural-sub sector in South Africa contributing 4 approximately 30% to the agricultural output. The aim of this research is to measure the profit 5 efficiency of smallholder sheep farmers and to identify the factors affecting profit efficiency of the 6 farmer, in order to propose better strategies for sustainable livestock production among 7 smallholder farmers in the Free State. A stochastic profit frontier approach was used to evaluate 8 the profitability and efficiency of 217 smallholders in the N8 development corridor Free State, 9 South Africa. The results found that the farmers are not efficiency and have great capacity to 10 improve profitability in sheep production. The result showed that Profit efficiencies of the farmers 11 varied between 15.5% and 80.4% with a mean of 65.1% implying that an estimated 34.9% of the 12 profit is lost due to a combination of economic and allocative inefficiencies in sheep production. 13 The study found that profit efficiency is positively influenced by level of education and household 14 size (members below 18 years old) while gender and sheep loss increase profit inefficiency. Profit 15 efficiency of the farmers can be significantly increased through effective education and training of 16 farmers. 17 18