Small ruminant lentiviruses (SRLVs) cause different clinical forms of disease in sheep and goats. So far in Spain, Maedi visna virus-like (MVV-like) sequences have been found in both species, and the arthritic SRLV disease has never been found in sheep until a recent outbreak. Knowing that arthritis is common in goats, it was of interest to determine if the genetic type of the virus involved in the sheep arthritis outbreak was caprine arthritis encephalitis virus-like (CAEV-like) rather than MVV-like. Alignment and phylogenetic analyses on nucleotide and deduced amino acid sequences from SRLV of this outbreak, allowed a B2 genetic subgroup assignment of these SRLV, compatible with a correspondence between the virus genetic type and the disease form. Furthermore, an isolate was obtained from the arthritic outbreak, its full genome was CAEV-like but the pol integrase region was MVV-like. Although its LTR lacked a U3 repeat sequence and had a deletion in the R region, which has been proposed to reduce viral replication rate, its phenotype in sheep skin fibroblast cultures was rapid/high, thus it appeared to have adapted to sheep cells. This outbreak study represents the first report on CAEV-like genetic findings and complete genome analysis among Spanish small ruminants.