α-keratins are structural proteins in the cortex of wool fibres and assemble in an organized fashion into keratin intermediate filaments. Variation in these keratin proteins affects the structure and characteristics of wool fibre, making keratin genes ideal candidates for the development of gene markers that describe variations in wool traits. A region of KRT85 spanning exon 3-4 (including the entire exon 3, intron 3, exon 4 and part of intron 4) was investigated. Two banding patterns defining two variant sequences (A and B) were observed in this region, and these were characterised by the presence of two single nucleotide polymorphisms. The effect of this variation in the exon 3-4 region of KRT85 on wool traits was investigated in 463 Merino × Southdown-cross lambs. The frequencies of these two variants in these sheep were 55.6% and 44.4%, respectively. Three different genotypes were observed with frequencies of 32.6%, 46.1% and 21.3% for AA, AB and BB, respectively. The presence of A was associated with an increase in greasy fleece weight and clean fleece weight, while the presence of B was associated with an increased wool prickle factor. These findings should be replicated in a broader range of sheep breeds to determine whether the associations are robust and to clarify whether the observed effects are attributable to breed differences or to gene effects themselves.