Merino yearling records from 1988 to 1992 birth years in ultrafine wool selection and random control flocks at Tara Hills High Country Station, New Zealand were analysed for live weight, fleece weight and wool characteristics. Estimates of heritability, genetic and phenotypic correlations among traits using REML methods are presented. Heritabilities (h2) of birth, weaning, autumn, spring and summer live weights and greasy and clean fleece weights were estimated as being 0·35, 0·34, 0·44, 0·43, 0·49, 0·24 and 0·28 respectively; while h2 of yield, fibre diameter, coefficient of variation in fibre diameter, staple crimp, staple length, staple strength, position of break, resistance to compression, bulk, CIE Y and CIE Y-Z were estimated to be 0·58, 0·59, 0·60, 0·45, 0·71, 0·13, 0·18, 0·46, 0·38, 0·38 and 0·42 respectively. Genetic correlations were found to be high among the live weights but low to moderate among fleece weight and wool characteristics. Heritability estimates of fibre diameter, fibre diameter variation and staple length were found to be higher in New Zealand fine wool Merinos than most of those reported in the literature. The results indicate that selection for reduced fibre diameter will have little effect on other major production traits such as live weight and fleece weight.