This miniature collie was developed in the Shetland Islands, which lie about 50 miles north of the mainland of Scotland. These isles have produced small or dwarf animals of many species, including the Shetland pony, dwarf Shetland cattle and the small Shetland sheep. They are rugged, rocky islands with little vegetation or other sources of sustenance. The Shetland Sheepdog’s diminutive size is natural given its development on these islands. In the 1700s, fishing boats regularly visited the Shetland Islands. They brought a number of different dogs to the isles, including black-and-tan King Charles Spaniels, Yakki dogs from Greenland, spitz-type dogs from Scandinavia and working sheepdogs from mainland Scotland. Those dogs, cross-breeding with native island dogs, produced the striking Sheltie we know today.

Interest in this breed as a companion dog began in the 19th century, when British sailors visited the Shetland Islands and started buying these beautiful little dogs to take home to their families. The first Sheltie was shown at Crufts in 1906, entered as a miniature Collie. In 1908, the Shetland Sheepdog Club of the Shetland Islands was founded, in Lerwick, the capital of the islands. The Sheltie was recognized by the Scottish Shetland Sheepdog Club, and by The Kennel Club (England), in 1909, as the Shetland Collie. In 1914, the breed gained recognition as the Shetland Sheepdog, due largely to the fact that fanciers of the larger Collies did not want a close name associated with a dwarf variety of their breed. However, the Shetland Sheepdog has existed for centuries as a much valued breed distinct from the larger Collie.

The American Kennel Club registered its first Shetland Sheepdog in 1911. The parent club of the breed, the American Shetland Sheepdog Association, was organized in 1929 by breed enthusiasts at the Westminster Kennel Club Dog Show in New York. The first specialty show for the Sheltie in America was held in 1933. There has been much debate between the various Shetland Sheepdog clubs world-wide about the proper description of structure, size and type for this breed. The American standard calls for a Sheltie between 13 and 16 inches at the withers, with any size variations being a disqualification.