Effects of gastrointestinal parasitism on sheep productivity are usually described using live weight change, however carcass productivity is more accurately described using dressing percentage (carcass weight as a proportion of live weight). This experiment had a 2 × 2 × 2 factorial design whereby 10-month-old Merino wethers were fed lucerne ( Medicago sativa) diets (fresh lucerne or lucerne chaff) with 2 levels of carboxymethycellulose (CMC) inclusion (0% or 8% CMC) and nematode larval challenge (no larval challenge or 10,000 Teladorsagia circumcincta and 10,000 Trichostrongylus colubriformis per week). Sheep were weighed and euthanased 50 or 51 days after larval challenge and CMC supplementation commenced. Weight of the carcass (hot standard carcass weight) and gastrointestinal organs (full and empty) were recorded and expressed as a proportion of live weight. Larval challenged sheep had a worm egg count (mean ± standard error) of 173 ± 38 eggs per gram of faeces and total worm count of 30,237 ± 2013 at slaughter. Larval challenged sheep had 1.3% lower dressing percentage ( p = 0.048), and 2% heavier full ( p = 0.007) and 1.2% heavier empty gastrointestinal tracts ( p = 0.012) compared to unchallenged sheep. There was no effect of CMC inclusion or lucerne type (fresh or chaff) on gastrointestinal tract weight or dressing percentage. Larval challenged sheep had 1.1% heavier full ( p < 0.001) and 0.6% heavier empty ( p < 0.001) small intestines, and 0.6% heavier full ( p = 0.005) and 0.3% heavier empty ( p = 0.026) large intestines compared to unchallenged sheep. Use of live weight change or other measures based on live weight (e.g. feed conversion efficiency) to assess the impact of nematode challenge in sheep may underestimate carcass productivity losses associated with larval challenge in sheep even at moderate levels of larval intake and without overt clinical signs of parasitism. Measurement of carcass weight and/or lean meat yield may better reflect the true economic effects of parasitism in sheep.