This paper examines past trends in the small ruminant sector in the West Asia and North Africa (WANA) region; it explains the main driving forces of these trends and their implications for the livelihoods of the poor; and addresses technological, institutional and policy issues that should be considered in order to improve the sector's performance and reduce its environmental impact. There has been significant growth in the small ruminant population and production in WANA during the last three decades. However, there is a widening gap between production and consumption. The production growth in the small ruminant sector is attributable to improvements in veterinary services, the provision of feed subsidies and credit for producers, the increased use of alternative feed resources and the progressive intensification of production. Consumption growth results from increases in per capita real income, urbanization and population growth. The benefits of this economic boom, however, may bypass the small producers in the WANA exporting countries, who are often the poorest in the region. Producers and traders in these countries face a challenge in maintaining their share of export markets because of structural and technical constraints that affect their competitiveness. The environmental impacts associated with the expansion of small ruminant production, in terms of rangeland degradation, are another public concern. The challenges are heightened by increasing competition from other suppliers and trends towards lower government subsidies and greater international trade. Technological improvements and policy changes are necessary for the better performance of the small ruminant sector in WANA to ensure that poor small producers are not excluded from the dynamic markets in the region and beyond.