Mycobacterium bovis (M. bovis) has an exceptionally wide host range including sheep. Information on tuberculosis (TB) in sheep is scarce, and there appears to be conflicting opinions about the relative susceptibility of sheep to infection. In Ethiopia, there was no single previous report on tuberculosis in sheep, though mixed farming of cattle and sheep is a common practice. In this study, following the observation of TB-like lesions on sheep died from sheep flock kept in contact with cattle herd, further investigation was conducted on the flock to assess the magnitude of the infection and identify and characterize the causative M. bovis strain. An outbreak investigation was carried out on 26 eligible sheep out of 33 sheep found on the farm. Comparative intradermal tuberculin (CIDT) test, postmortem examination, Mycobacterium culturing, and spoligotyping were the techniques used in the study. The prevalence of TB in the tested sheep was 15% (4/26). All the sheep that were positive to CIDT had gross lesions suggestive of TB. Three of the positive sheep had extensive and multiple lesions. M. bovis was isolated from all four sheep and the strain was identified as spoligotype SBO134. The in-contact dairy cows were screened for TB and 98% (45/46) of the cows tested positive to CIDT. Furthermore, the same strain, SB0134, was also isolated from the two in-contact cows. The isolation of a matching genotype (SB0134) of M. bovis from both species sharing a known epidemiologic link strongly suggests that the sheep flock might have acquired the pathogen from the dairy cows. This warrants strict physical separation of the sheep flock from the cattle herd to prevent such interspecies transmission of M. bovis.