Dissemination of small ruminant lentivirus (SRLV) infections in Norway is affected by the different control strategies used for maedi-visna virus (MVV) infections in sheep and caprine arthritis-encephalitis virus (CAEV) infections in goats. Here we investigated SRLV phylogenetic group variants in sheep. CAEV-like isolates, belonging to phylogenetic group C, were found among both seropositive sheep and goats in mixed flocks, in which sheep and goats are kept together. Intra-herd clustering confirmed that mixed flock animals were infected by the same virus variant, suggesting ongoing interspecies transmission. Few sheep flocks were found to be infected with the MVV-like phylogenetic group A. The apparent absence of SRLV group A type in goats is probably due to the MVV control programme and animal management practices. SRLV group C targets lungs and mammary glands in sheep, and induces typical SRLV pathological lesions. SRLV group C isolated from the sheep mammary glands suggested a productive infection and potential for transmission to offspring. SRLV group C was most prevalent among goats. A lower PCR sensitivity in seropositive sheep suggested a lower load of SRLV group C provirus in sheep than in goats. Higher genetic divergence of group C than in other SRLV groups and extensive heterogeneity among group C isolates in the matrix C-terminal region demonstrate the need for identifying conserved target regions when developing PCR protocols for SRLV detection. As sheep and goats may serve as reservoirs for all SRLV genogroup types, successful control programmes require inclusion of both species.