What to do when I can't find sheep?

Solution 1:

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

Solution 2:

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.

Solution 3:

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