Most sheep breeding programs designed for the tropics and sub-tropics have to take into account the impacts of environmental adaptive traits. However, the genetic mechanism regulating the multiple biological processes driving adaptive responses remains unclear. In this study, we applied a selective sweep analysis by combing 1% top values of Fst and ZHp on both altitude and geographic subpopulations (APS) in 636 indigenous Tibetan sheep breeds. Results show that 37 genes were identified within overlapped genomic regions regarding Fst significantly associated with APS. Out of the 37 genes, we found that 8, 3 and 6 genes at chromosomes (chr.) 13, 23 and 27, respectively, were identified in the genomic regions with 1% top values of ZHp. We further analyzed the INDEL variation of 6 genes at chr.27 (X chromosome) in APS together with corresponding orthologs of 6 genes in Capra, Pantholops, and Bos Taurus. We found that an INDEL was located within 5'UTR region of HAG1 gene. This INDEL of HAG1 was strongly associated with the variation of APS, which was further confirmed by qPCR. Sheep breeds carrying "C-INDEL" of HAG1 have significantly greater body weight, shear amount, corpuscular hemoglobin and globulin levels, but lower body height, than those carrying "CA-INDEL" of HAG1. We concluded that "C-INDEL" variation of HAG1 gene confers better hypoxia tolerance in the highlands of Tibetan and explains well geographic distributions in this population. These results contribute to our understanding of adaptive responses to altitude and geographic adaptation in Tibetan sheep populations and will help to guide future conservation programs for Tibetan sheep native to Qinghai-Tibetan Plateau.