Most sheep farmers are aware of the importance of monitoring animal health and well-being for profitable sheep production. Unfortunately, there are only a few benchmarked functional measures of sheep well-being but much can be gained from our understanding of other species. Moreover, comprehensive monitoring programs may be complex and relatively expensive to implement. Hence, this work reports the results of a research study on the usefulness of functional markers in measuring dairy sheep well-being, taking into account farm management and environmental conditions. The study was conducted on 11 farms breeding Italian islander sheep breeds. The husbandry and management parameters of each farm were assessed and, based on the findings, the farms were scored in ascending quality order. Flock information concerned housing, milking system, pen size, grazing hours, health management, and stockmanship. Medical history, clinical data, the most relevant haematological, chemical and biochemical parameters, as well as the haemoglobin genotype were recorded for 415 individuals. The whole data-set was analyzed by Spearman correlation and multivariate statistical procedures, showing that albumin, serum alkaline phosphatase, haematocrit, and haemoglobin were the most significant functional markers of a flock’s general conditions. Haematocrit and haemoglobin reflect animal health status, while albumin and serum alkaline phosphatase are a measure of nutritional status and physical activity, respectively. These are objective parameters, which can be easily measured from blood samples and have proved to be effective for grouping to interpret animal well-being.