If you can't find sheep for wool (I'm assuming)
you can always kill spiders and craft their string into wool. http://www.minecraftwiki.net/wiki/String
gaming.stackexchange.com/users/19014/user19014
The best solution is to simply go for a walk and look for them.
Bring a sword, food and wheat.
I tend to find sheep in open stretches of a "plains" biome devoid of trees.
I've also had decent success finding them on the side of hills, again, devoid of trees.
They tend to flock in groups of 6 or so.
If you find any sheep simply hold the wheat in your hand and they will follow you around.
Use this to corral them into a pen/holding area for future use or to find them again.
Another option is to load up a program like MCEdit and look around the world for entities (small red blocks), select them, analyze (to ensure you have sheep or not other mobs or dropped items), then copy and paste.
Not quite as easy as it sounds but can sometimes help.
gaming.stackexchange.com/users/8506/Dycker
You can encourage passive mobs like Sheep to spawn by creating a large, flat grassy area.
They only spawn on grass blocks, so having a big, open, flat grass field gives you more chances.
Relevant wiki pages: Sheep Grass
gaming.stackexchange.com/users/5302/Cory J
I had this problem when I first started playing - couldn't figure out how to make bread so just killed everything nearby and ate it.
Didn't realise they wouldn't respawn.
Ended up just heading into the next chunk, building a large enclosed area and luring that chunk's sheep into it.
Once there it was easy to breed them.
gaming.stackexchange.com/users/6028/Rory Alsop
You can always go to another chunk, and just keep running around with wheat until sheep, pigs, cows, chickens, etc start to followe
but if your scared to get lost, put lamps down where your trail is, and we getting animals to follow you, you have to keep turning around and making sue they are still folowing or make sure they see the wool, its better to just walk backwards watching them the entire way.
gaming.stackexchange.com/users/28933/MorganRichardsM
I am currently playing Minecraft 1.1 and I can't find any sheep! I know that there are sheep in this world because I have seen the same world in videos with sheep. Does anyone have any tips or ideas on what I should do? I simply  can't  find any sheep at all!
What to do when I can't find sheep?
gaming.stackexchange.com
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gaming.stackexchange.com/questions/46877
gaming.stackexchange.com/users/18253/Matt
Create a large, grassy area to encourage sheep to spawn. You can also walk around with wheat until sheep start to follow you. It seems that the community is, more or less, on the same page. Apart from third party software usage, there is indeed a way to either replace the sheeps or find them while exploring.
The user is speaking about a substitute to sheep. It is instructed that the player should explore. Third party software is recommended.