Follistatin (FST) is proved to be a key player in hair follicle morphogenesis. This study was designed to investigate the association of SNPs in the FST gene with wool quality traits i.e. fibre diameter, crimp number, and staple length in sheep breeds from Pakistan. Genomic DNA isolated from representative samples of the sheep breeds. A 4444 bp fragment of the FST gene (covering exons 2–6 and the intervening introns) was amplified through PCR. The amplified products were sequenced through Next Generation Sequencing (NGS) technology. The results showed variations in the wool quality parameters among the sheep breeds. Lowest crimp number was recorded for Hashtnagri and Mazai sheep breeds (1.7 ± 0.24 and 1.0 ± 0.12 crimps/cm, respectively). While Kari sheep had the thinnest fibre diameter (27.9 ± 1.19 μm) compared to other sheep breeds. Longest staple length (10.36 ± 0.73 cm) was observed for Ghalji sheep. Sequencing results revealed a total of 51 variants in the targeted region of the FST gene. Kari sheep’s FST gene was the most diverse possessing nine unique variants in the intronic region and two in the coding region. A total of 11 FST variants showed association with fiber diameter, among which two novel missense SNPs (c.229 A>G and c.236 T > C) in the exon 2 were unique to Kari sheep. These SNPs were found to have effect the protein structure and stability and may be used as markers for fine wool having thinner fiber diameter in sheep. These results suggest significant impact of variation in the FST gene on wool fibre diameter.