Monitoring animal location and proximity can provide useful information on behaviour and activity, which can act as a health and welfare indicator. However, tools such as global navigation satellite systems (GNSS) can be costly, power−hungry and often heavy, thus not viable for commercial uptake in small ruminant systems. Developments in Bluetooth Low Energy (BLE) could offer another option for animal monitoring, however, BLE signal strength can be variable, and further information is needed to understand the relationship between signal strength and distance in an outdoor environment and assess factors which might affect its interpretation in on-animal scenarios. A calibration of a purpose-built device containing a BLE reader, alongside commercial BLE beacons, was conducted in a field environment to explore how signal strength changed with distance and investigate whether this was affected by device height, and thus animal behaviour. From this calibration, distance prediction equations were developed whereby beacon distance from a reader could be estimated based on signal strength. BLE as a means of localisation was then trialled, firstly using a multilateration approach to locate 16 static beacons within an ∼5 400 m2 section of paddock using 6 BLE readers, followed by an on-sheep validation where two localisation approaches were trialled in the localisation of a weaned lamb within ∼1.4 ha of adjoining paddocks, surrounded by nine BLE readers. Validation was conducted using 1 days’ worth of data from a lamb fitted with both a BLE beacon and separate GNSS device. The calibration showed a decline in signal strength with increasing beacon distance from a reader, with a reduced range and earlier decline in the proportion of beacons reported at lower reader and beacon heights. The distance prediction equations indicated a mean underestimation of 12.13 m within the static study, and mean underestimation of 1.59 m within the on-sheep validation. In the static beacon localisation study, the multilateration method produced a mean localisation error of 22.02 m, whilst in the on-sheep validation, similar mean localisation errors were produced by both methods – 19.00 m using the midpoint and 23.77 m using the multilateration method. Our studies demonstrate the technical feasibility of localising sheep in an outdoor environment using BLE technology; however, potential commercial application of such a system would require improvements in BLE range and accuracy.