Simple SummaryWe previously detected selection markers of sheep with different tail types and found that bone morphogenetic protein 2 (BMP2) was strongly selected. We therefore predicted that BMP2 might be involved in fat deposition in sheep tails or related to sheep tail type. However, no studies have investigated the molecular mechanism of BMP2 in the formation of sheep tails. In this study, we performed flight mass spectrometry genotyping on the BMP2 gene of 533 sheep with different tail types and functionally verified our results at the cellular level. This aimed to provide basic research data for the regulation of fat deposition in sheep tails and to identify genetic markers for molecular breeding.Bone morphogenetic protein 2 (BMP2) is strongly selected in both fat-tailed and thin-tailed sheep and may be a candidate gene for sheep tail type selection. However, the mechanism of action of BMP2 in sheep tail fat deposition remains unclear. This study investigated genetic variation and haplotype combinations of the BMP2 gene in sheep with different tail types, aiming to reveal the molecular mechanism of BMP2 in sheep tail fat deposition. We detected a total of three single nucleotide polymorphisms (SNPs) (g.48401619 T > A, g.48401272 C > A, and g.48401136 C > T) among 533 sheep. The alleles and genotype frequencies of these SNPs were in Hardy–Weinberg equilibrium and showed significant correlations with tail length. Linkage disequilibrium existed between the g.48401272 C > A and g.48401136 C > T sites, where CACT was the predominant genotype. At the cellular level, the expression levels of peroxisome proliferator-activated receptor gamma (PPARγ) and lipoprotein lipase (LPL) were upregulated after BMP2 overexpression; there were significantly higher levels of PPARγ than controls at 0 d and 1 d, and of LPL than controls at 1 d and 7 d. These results indicate that the BMP2 gene may participate in sheep tail fat deposition and could be used for molecular-marker-assisted selection of sheep tail type.