ABSTRACT: The Distal-less 3 (homeobox protein DLX-3), a transcription factor, is critical for the development of hair follicle and hair formation and regeneration. We previously identified and found that four SNPs (c. *118T>C, c. *228T>C, c. *688A>G and c. *1,038_1,039 insC) in 3' untranslated region (UTR) of sheep DLX3 were in high linkage disequilibrium with each other and significantly associated with wool crimp (P<0.05), however, the underlying mechanisms by which these SNPs affect the wool crimp remains unknown. In the present study, we performed association analysis between these four identified SNPs and DLX3 gene expression in sheep skin using quantitative real-time RT-PCR. The results showed that these SNPs were significantly associated with sheep skin DLX3 mRNA expression levels. Then, we constructed DLX3 3'UTR luciferase reporters and validated the association. The reporter assays showed that the three major haplotypes, derived from the four SNPs, had significantly different effects on luciferase reporter activity and the four SNPs also had significantly different allelic effects on the luciferase reporter activity (p < 0.05). Bioinformatics analysis showed that the SNP (c. *1,038_1,039 insC) was located within a potential miR-188 binding site of the 3'UTR of sheep DLX3 mRNA. This SNP may affect miR-188-mediated DLX3 gene expression and result in phenotypic variation. To test the hypothesis, we investigated the effects of miR-188 mimic and inhibitor on the activity of the DLX3 3'UTR luciferase reporter with different SNP alleles. The results showed that in both sheep fetal fibroblasts (SFFs) and human HaCaT cells, miR-188 mimic could significantly decrease the allele D (deletion) luciferase reporter activity (p < 0.05), but miR-188 inhibitor could increased the reporter activitiy. However, neither miR-188 mimc nor inhibitor could influence the allele I (insertion) reporter activity. In addition, transfection of miR-188 mimic dramatically decreased the endogenous expression of DLX3 in SFFs (p < 0.05). Taken together, we demonstrated that DLX3 is a target gene of miR-188 and the SNP (c. *1,038_1,039 insC) is a functional SNP, and affects miR-188-mediated gene regulation of sheep DLX3. Our finding may in part explain allelic difference in gene expression and wool crimp in our tested sheep population.