Genetic basis of fat deposition in sheep tail have not been completely elucidated yet. Understanding the genetic mechanisms controlling fat-tail size can improve breeding strategies to modulate fat deposition. RNA sequencing has made it possible to discover genetic variants that may underlie various phenotypic differences. Hence, to identify genetic variants that are important for describing different fat-tail phenotypes in sheep, RNA sequencing was used for single nucleotide polymorphism (SNP) calling in two Iranian sheep breeds (Lori-Bakhtiari, fat-tailed; n = 4, vs Zel, thin-tailed; n = 4). Using a stringent pipeline, a total of 112,344 known SNPs were genotyped, of which 30,550 and 42,906 SNPs were shared by at least two Lori-Bakhtiari and Zel, respectively. Comparing these SNPs showed 2,774 (including 209 missense and 25 deleterious SNPs) and 10,470 (including 1,054 missense and 116 deleterious SNPs) breed-specific SNPs in Lori-Bakhtiari and Zel sheep, respectively. Potential breed-specific SNPs were detected by considering those located in QTL regions associated with fatness or reported as important candidates in previous similar studies. Of the breed-specific SNPs, 724 and 2,905 were located in the QTL regions. Functional enrichment analysis of the affected genes revealed several enriched gene ontologies and KEGG pathways related to fat metabolism. Based on the results, several affected genes were proposed to be strongly linked with fat deposition such as DGAT2, ACSL1, ACACA, ADIPOQ, ACLY, FASN, CPT2, SCD, ADCY6, PER3, CSF1R, SLC22A4, GFPT1, CDS2, BMP6, ACSS2, ELOVL6, HOXA10 and FABP4. Moreover, several SNPs were found in the candidate genes related to fatty acid oxidation introducing them as promising candidates responsible for lower fat content in tail of Zel. Our findings provided new insights into the genetic mechanisms of fat deposition in sheep, which can serve to designing appropriate breeding programs.