Estimates of heritability, genetic correlations, phenotypic correlations, and other parameters among eight characteristics were obtained from Merino sheep at Trangie Agricultural Experiment Station. One set of estimates was obtained by parent-offspring regressions from data obtained between 1943 and 1952. Another set was obtained by half-sib analyses from data from sheep with first adult shearings in 1953. Estimates of heritability were: greasy fleece weight, 0.40 ± 0.06; yield (per cent.), 0.39 ± 0.07; clean fleece weight, 0.47 ± 0.07; staple length, 0.56 � 0.07; crimps per inch, 0.47 ± 0.11; folds, 0.50 ± 0.07; body weight, 0.36 ± 0.08; birthcoat, 0.80 ± 0.10. The most important genetic correlation limiting genetic improvement in clean fleece weight is that between this trait and crimps per inch. Because of this the rate of improvement in fleece weight could be reduced by about 30 per cent. whenever crimps per inch is also selected. Other genetic correlations indicate antagonisms between characteristics, but these antagonisms appear to be of minor importance except that between clean fleece weight and crimps per inch. This sheep population does not appear to have reached a state of genetic homeostasis, a t least with respect to the characteristics studied. However, the findings emphasize the necessity for careful evaluation of the economic importance of different traits, and for accurate measurement, if maximum genetic progress is to be achieved.