Hydatid disease was diagnosed in a Deccani sheep during postmortem examination which revealed hydropericardium, gelatinization of fat, different sized hydatid cysts in lungs and liver. Cysts were filled with clear fluid, ranges from 10ml to 25ml. The size of cyst varied from 2 cm to 3 cm in diameter. Histopathological section of the affected lungs and liver revealed laminated hyaline layer surrounded by thick coat of granulation tissue causing fibrosis and infiltration of leucocytes. The adjoining areas of the cysts showed alveolar emphysema and vascular congestion in lung and progressive focal pressure atrophic lesions with vacuolar degeneration in the effected lungs and liver. In the present case, the animals were let loose for grazing, which had access to stray dogs and results into maintenance of parasites or parasitic larvae or ova in the environment. Based on the history, gross and microscopical examination of the organs, it was diagnosed as hydatid disease.