Sheep wool is keratin-rich by-product of sheep breeding and textile industry. Due to complex structure of keratin, this wastes are quite resistant to degradation and represent a serious environmental problem. Waste wool is often converted to different hydrolysates, which are mainly prepared by environmental unfriendly physico-chemical treatments, resulting in destruction of some amino acids and energy loss. Use of biotechnological approaches, such as microbial or enzymatic pretreatment, and composting, can significantly reduce the environmental impact, and produce useful products, such as fertilizers or substrates for biogas production, and high-added value products (peptides, amino acids and keratinolytic enzymes). In this review we compare different ways of waste wool processing, focused on biotechnological applications.