Population contribution to genetic diversity can be estimated using neutral variation. However, population expansion or hybridization of diverged ancestries may weaken correlation between neutral and non-neutral variation. Microsatellite variation was studied at 25 loci in 20 native and 12 modern or imported northern European sheep breeds. Breed contributions to total gene diversity, allelic richness and mean allele-sharing distance between individuals were measured. Indications of changes in population size and admixtures of divergent ancestries were investigated and the extent of inbreeding was estimated. The northern European sheep demonstrated signs of reduction in effective population size. Many old, small populations made a substantial positive contribution to total molecular variation, but populations with several divergent major ancestries did not contribute substantially to molecular variation, with the exception of the Norwegian Rygja sheep. However, several diverged major ancestries may cause it to contribute less to non-neutral variation than expected from the microsatellite data. Breed uniqueness and within-breed variability generally had opposite effects on breed contributions to molecular diversity. The degree of inbreeding did not reflect the breed contribution to total gene diversity or allelic richness, but inbred populations increased the mean allele-sharing distance between individuals. Our study indicates breed conservation to be especially important in maintaining allelic variation in northern European sheep and supports the evolutionary importance of peripheral populations.