An experimental programme was initiated in 1990 to investigate the consequences of selection for reduced fatness in hill sheep and to estimate genetic parameters for carcass traits in the same class of animal. Thirty-two progeny groups of lambs were born as a result of mating Scottish Blackface rams to ewes of the same breed on two Scottish Agricultural College hill farms in 1991 and 1992. Sires were from two divergent selection lines for subcutaneous back fat depth and were selected under ad libitum feeding conditions on an index combining live weight and ultrasonic fat depth at 20 weeks of age. The index was designed to alter body composition but not body weight. Weaned male progeny (reared extensively) were brought together from both farms in August of each year, reared on grass and finished for slaughter on swedes at a target condition score of 3. Measurements taken at weaning were: live weight, average ultrasonic measurements of average subcutaneous fat depth and muscle depth. At slaughter, traits measured were: pre-slaughter live weight, pre-slaughter condition score, age at slaughter, cold carcass weight, killing-out proportion, Meat and Livestock Commission (MLC) fat class and MLC conformation class. Side and shoulder dissections were made on proportionally 0·2 and 0·8 of lambs respectively and lean tissue, subcutaneous fat, intermuscular fat and bone were measured. Comparisons were made between the two genetic lines and genetic parameters were estimated from data adjusted to three different ‘end-points’: constant dissected subcutaneous fat weight, constant age at slaughter and constant cold carcass weight. Moderate to low heritability estimates were obtained for most traits: pre-slaughter live weight = 0·36, cold carcass weight = 0·39, fat class = 0·13, conformation class = 0·09, lean weight = 0·27, bone weight = 0·36 (constant subcutaneous fatness), intermuscular fat = 0·20, subcutaneous fat = 0·20 (constant cold carcass weight). Correlations between ultrasonic measurements at weaning, and slaughter and dissected carcass components were moderate to weak. However, there is sufficient genetic variation in the carcass traits to warrant inclusion in breeding goals for hill sheep. The results also show that genetic differences obtained by selection under intensive rearing conditions for divergent fatness are also seen in progeny reared under extensive (hill) conditions.