Regarding mutations of PROP1 (Prophet of POU1F1) gene significantly associating with combined pituitary hormone deficiency (CPHD) in human patients and animals, PROP1 gene is a novel important candidate gene for detecting genetic variation and growth, reproduction, metabolism traits selection and breeding. The aim of this study was to detect PROP1 gene mutation of the exon 1-3 and its association with wool traits in 345 Chinese Merino sheep. In this study, on the basis of PCR-SSCP and DNA sequencing methods, ten novel SNPs within the sheep PROP1 gene, namely, AY533708: g.45A > G resulting in Glu15Glu, g.1198A > G, g.1341G > C resulting in Arg63Ser, g.1389G > A resulting in Ala79Ala, g.1402C > T resulting in Leu84Leu, g.1424A > G resulting in Asn91Ser, g.1522C > T, g.1556A > T, g.1574T > C, g.2430C > G were reported. In addition, association analysis showed that three genotypes of P4 fragment were significantly associated with fiber diameter in the analyzed population (P = 0.044). These results strongly suggested that polymorphisms of the PROP1 gene could be a useful molecular marker for sheep breeding and genetics through marker-assisted selection (MAS).