The effect of peach shell biochar (PSB) amendment on sheep manure (SM) composting was investigated. Five different ratios of PSB were applied (0%, 2.5%, 5%, 7.5%, and 10% PSB), and named T1 to T5, and run 50 days of composting experiment. It was found that PSB (especially 7.5% and 10%) could improve the compost environment, regulate the activity of microorganisms and related enzymes, and promote the decomposition of compost. 7.5% and 10% PSB advanced the heap into the thermophilic stage and increased the maximum temperature, while also increasing the germination index by 1.40 and 1.39 times compared to control. Importantly, 10% PSB effectively retained more than 60% of carbon and 55% of nitrogen by inhibiting the excess release of NH3 and greenhouse gases. High proportion PSB amendment increased the activity of dehydrogenase and cellulase, but inhibited protease and urease. The correlation results indicated that PSB changed the key bacterial genus, and there was a stronger association with environmental factors at 7.5% and 10%. Therefore, 7.5% and 10% peach shell biochar can be used as appropriate proportions to improve composting conditions.