Virtual fencing (VF) technology is gaining interest due to its potential to facilitate sustainable grazing management. It allows farmers to contain grazing livestock without physical fences, thereby reducing the time and labour associated with the implementation of conventional fences. From a conservation perspective, some sensitive areas within uplands should not be grazed during certain periods of the year, and VF provides an invisible and moveable fence line that can exclude livestock from these areas. However, there are also concerns associated with its use, including animal welfare impacts, cost-effectiveness, and public perception. The extent to which VF can contribute to make livestock systems more sustainable remains to be investigated. To address this gap, this study investigates the potential of VF to promote sustainable grazing management using the Efficiency, Substitution, and Redesign framework, which has been used for the first time in this context. The framework is particularly relevant in taking an active and normative approach to identify key aspects to focus on to help achieve sustainability. We consulted stakeholders including farmers, wildlife inspectors, veterinarians, policy officers, researchers, NGOs, farm advisors or certification managers, through focus groups (N = 4) and in-depth, semi-structured interviews (N = 5). Stakeholders have highlighted the potential of VF to provide new opportunities to increase the efficiency and sustainability of livestock grazing systems, enabling their redesign, and contributing to improved environmental and animal welfare outcomes, as well as higher financial and social performance. However, there are important aspects that remain to be addressed to achieve such redesign, including issues of reliability due to poor network signal, animals’ ability to learn, biosecurity and safety issues related to the absence of physical fences, farm suitability and farmers’ ability to use the systems effectively. This study highlights the need to ensure that the development and uptake of VF are mutually beneficial to farmers, animals, and the wider farming industry. This includes a highlight on the importance of participative approaches to involve key stakeholders to address concerns and maximise the potential of the technology.