Penning of livestock especially in the southern Indian peninsula can be traced back to the Neolithic age. The presence of ‘Ashmounds’ across most parts of the southern Indian peninsula indicates a complex agro-pastoral economy flourishing since the Neolithic era. Contemporary studies on sheep penning in India, however, remain mainly focused on its contribution to soil fertility and relevance to organic farming and economics, but very few studies have focussed on the farmers’ preference for sheep penning, farmer-pastoralist relationships and sheep penning economy in the backdrop of a rapidly changing agriculture landscape in the Telangana state of India. Observations of the study indicate that changes in agricultural practices and decrease in commons have led to changes in the sheep flock size, seasonal migration pattern of pastoralists and farmers’ preference for sheep penning in the study area. Participant farmers of the study, who practice both penning and application of synthetic fertilizer, reported to have incurred relatively lesser input costs than the farmers who exclusively rely on synthetic fertilizers. Penning was reported to be the second major source of household income for the pastoralists who participated in the study, next to the sale of live animals.