The felting lustre (FL) mutation found in Merino sheep results in a fleece that has a lustrous appearance and readily felts. This phenotype was described 50 years ago to result from the mutation of a single gene, but the molecular and cellular changes in the wool are not well understood. In this study, follicle and fibre material of FL mutant (n = 3) and normal control (n = 5) Merino ewes was compared using histological analysis, sodium dodecyl sulfate-polyacrylamide gel electrophoresis (SDS-PAGE), real-time polymerase chain reaction (qPCR) and electron microscopy [scanning electron microscopy (SEM) and transmission electron microscopy (TEM)]. Histological examination suggested that follicle structure in FL mutants is essentially normal, while SDS-PAGE analysis found that some low molecular weight keratin-associated proteins (KAP) were present at much lower levels in FL wool. Examination of transcript prevalence revealed that the KAP6.1, KAP7 and KAP8 genes in FL mutant follicles are downregulated, while the KAP2.12 and KAP4.2 genes are upregulated. TEM analysis indicated that there is only one type of cortical cell, the paracortical cell, in the fibre of FL mutants, while there are paracortical and orthocortical cells in fibres of normal Merino sheep. In contrast, SEM suggested the surface topography of FL wool fibres is normal. The evidence presented here strongly suggests that the properties of FL wool can be ascribed, at least in part, to the lower content of high glycine/tyrosine proteins and the reduction in orthocortical cells in mutant wool fibres.