The objective of this study was to analyze differences in thermoregulation and water balance under conditions of heat load and water restriction between fat-tailed sheep (S) and Kacang goats (G). The daily intakes of food and water, daily outputs of urine and feces, rectal temperature, respiration rates, hematocrit values and plasma volumes of five shorn S and five G were determined over 10 days of four consecutive experimental conditions: (1) indoor – unrestricted water; (2) indoor – restricted water; (3) 10 h sunlight exposure – unrestricted water; and (4) 10 h sunlight exposure – restricted water. There was a 6- to 7-day adjustment period between two consecutive conditions. The study was conducted during the dry season. The animals were placed in individual cages, fed chopped native grass ad libitum and had free access to a urea–molasses multi-nutrient block. Under sunlight exposure with unrestricted water availability, S and G record an increase in the maximum rectal temperatures from 39.2°C to 40.2°C and from 39.9°C to 41.8°C, respectively. The thermoregulatory strategy used by S for maintaining a lower rectal temperature mostly depends on increasing the respiration rate as the main cooling mechanism. On the other hand, G apparently used sweating as the predominant mechanism for cooling. Moreover, G seemed to be more tolerable to higher heat storage and body temperature than S with a significant increase in plasma volume (P < 0.01), and this may be beneficial to the animals for the prevention of water loss. Under restricted water condition in either indoor or outdoor environment, both species decreased their plasma volume significantly, but rectal temperatures were relatively maintained. In all experimental conditions, the daily total water exchanges (ml/kg0.82 per day) of S were significantly higher than G (P < 0.01). However, when the percentages of the total daily water exchange were considered, the water lost through urination (38% to 39%), defecation (11% to 14%) and evaporation (46% to 49%) by S and G was not significantly different. Therefore, the results from this study clearly showed that S and G have different homeostatic strategies for the regulation of body temperature and fluid to cope with heat load and water restriction. These differences may have an important impact on the production management of S and G.