Abstract: Mutton is an important component of the “vegetable basket” for urban and rural residents in China. As the dietary structure of residents continues to upgrade, the demand for mutton consumption has maintained steady growth. However, the spatial pattern of China’s mutton sheep production has long been characterized by “strong in the north and weak in the south”. Therefore, the production potential of the southern regions urgently requires scientific evaluation and systematic exploration. This study took 15 southern provincial-level regions from 2015 to 2024 as the research subjects, and employed the resource endowment index (EI) and the aggregate comparative advantage index (AAI) models to conduct an empirical analysis of the comparative advantage level, evolutionary trends, and regional differentiation characteristics of the mutton sheep industry in southern China. The results showed that the comparative advantage of the mutton sheep industry in the southern regions exhibited significant inter-provincial and regional differentiation. During the study period, only three provinces, Yunnan, Anhui, and Sichuan had an average resource endowment index greater than 1, indicating a natural resource advantage above the national average. The overall aggregate comparative advantage of the southern region remained weaker than the national average, with all provinces had an average AAI value of less than 1. Among them, Anhui and Yunnan had the most prominent comprehensive advantages, serving as the core areas for realizing the production potential of the mutton sheep industry in the south. Moreover, the comparative advantage of the southern mutton sheep industry showed a trend of shifting toward the Central China agricultural region, while the industrial advantage of the traditional main producing areas in the Southwest was continuously weakening. Based on these findings, this paper proposed differentiated development strategies tailored to the industrial foundations and resource characteristics of different subregions in southern China, providing empirical support for optimizing the regional layout and enhancing the overall competitiveness of the mutton sheep industry in southern China.