Background: Merino sheep is the most famous fine wool sheep in the world. It has high wool production and excellent wool quality, which has attracted worldwide attention. The fleece of the Merino sheep is composed predominantly of wool fibres grown from secondary wool follicles. Therefore, it is very necessary to study the development of hair follicle in order to understand the mechanism of wool. The hair follicle is a complex biological system involved in a dynamic process governed by gene regulation. The development process of hair follicle is very complex and unclear. The purpose of our research is to find candidate genes related to hair follicle development, provide molecular breeding theoretical basis for the cultivation of fine wool sheep, and provide side reference for the problems of hair loss and alopecia areata that perplex human beings.Results: We analyzed 18 mRNA data of skin tissues of 18 Merino sheep at 4 days (E65, E85, E105 and E135) and 2 days after birth (D7 and D30). We identified 7879 differentially expressed genes (DEGs) and 12623 novel-DEGs, revealed different expression patterns of these DEGs at six stages of hair follicle development, and proved their complex interactions. DEGs with stage-specific expression were significantly enriched in epidermal differentiation and development, hair follicle development and hair follicle morphogenesis, and enriched in many pathways related to hair follicle development. The key genes (LAMA5, WNT10A, KRT25, SOSTDC1, ZDHHC21, FZD1, BMP7, LRP4, TGFβ2, TMEM79, SOX10, ITGB4, ITGA6, GLI2) affecting hair follicle morphogenesis was identified by network analysis. Conclusion: This study provides a new reference of the molecular basis of hair follicle development and lays a foundation for further improving sheep hair follicle breeding. Candidate genes related to hair follicular development were found, which provided a theoretical basis of molecular breeding for the culture of fine wool sheet. These results are a valuable resource for biological investigation of fleece evolvement in animals and also supply some potential clues for understanding the molecular mechanisms of human hair development.