Abstract: To facilitate the high-quality development of the mutton sheep industry in Yunnan Province, this study assesses the competitiveness of the industry across 16 prefectures based on their geographical characteristics and resource endowment, providing a foundation for prefecture-level policy formulation. Based on the development status of the mutton sheep industry in 16 prefectures of Yunnan Province from 2014 to 2023, the study employs the Efficiency Advantage Index (EAI), Scale Advantage Index (SAI), and Aggregate Advantage Index (AAI) to evaluate regional competitiveness. According to the geographical features of the prefectures, the mutton sheep industry in the province is classified into four regional types: the Plateau Pastoral Area with Scale Advantage, the Central Yunnan Intensive Efficiency Type, the Southern Yunnan Potential Enhancement Type, and the Ecologically Sensitive Undeveloped Type. Based on this classification, the following recommendations are proposed according to the dominant industries and geographical contexts of the four regions: (1) The Plateau Pastoral Area should focus on improving breeding efficiency; (2) The Central Yunnan region should expand the industrial chain by increasing mutton sheep processing (such as slaughtering, segmentation, and ready-to-eat product development) to enhance market share and drive processing and sales in other regions; (3) Southern Yunnan should leverage the local ethnic traditions of mutton consumption, emphasizing the protection and utilization of local sheep germplasm resources, promoting scientific breeding models, and improving infrastructure to reduce costs and increase efficiency; (4) Ecologically sensitive areas should explore the integration of ecological breeding and brand building, aiming to establish a supply base for mid-to-high-end culinary ingredients.