The Qinghai-Tibet Plateau (QTP) is characterized by an extreme hypoxia, which may lead to lack of sufficient oxygen for compost production, and thus seriously affecting the compost quality. The moisture content (MC) has a direct effect on the oxygen content of composting pile. At present, the research on the optimum moisture content of compost production on the QTP is still lacking. This study aimed to investigate the influences of MC on fermentation quality of sheep manure composting on the QTP and to further analyze the changes of microbial metabolic function and enzyme activity under different MC. Composting experiment with low MC (45%) and conventional MC (60%) was conducted in both summer and autumn. The results showed that the composting efficiency of 45% MC was better than 60% in both seasons, which was mainly manifested as longer high-temperature period (summer:16d vs 14d, autumn: 7d vs 2d), higher germination index (summer:136.1% vs 128.6%, autumn:103.5% vs 81.2%), and more humus synthesis (summer:159.8g/kg vs 151.2g/kg, autumn:136.1k/kg vs 115.5k/kg). The 45% MC can improve microbial metabolism, including increasing the abundance of functional genes involved in carbohydrate metabolism, amino acid metabolism, and nucleotide metabolism and improving the activities of cellulase, β-glucosidase, protease, polyphenol oxidase, and peroxidase. In conclusion, 45% MC can improve the fermentation efficiency and products quality of sheep manure compost on QTP.