Wool

Wool (previously known as cloth) is a block derived from sheep that can be dyed in any of the 16 different colors. Wool blocks are weak, highly flammable, and offer little resistance against explosions.

From sheep
Wool is harvested by right-clicking a sheep with shears (1–3 wool) or killing it (1 wool). White, light gray, gray, black, brown, and pink wool can be found naturally on sheep. Untamed wolves (commonly seen in Forest or Taiga biomes) will sometimes kill nearby sheep, resulting in the occasional blocks of wool being found.

Dyeing sheep (right-clicking them while holding dye) is the most productive method of obtaining colored wool, as the sheep will drop 1–3 blocks of wool when shorn, and can be reshorn repeatedly if the sheep have access to grass. This is an infinitely higher yield than can by gained by dyeing blocks of wool or killing a dyed sheep. All sheep can be colored and re-colored equally easily, regardless of whether they are any of the naturally occurring colors (white, brown, pink, black, gray, or light gray), or previously dyed to any available shade. Nor is there any need to 'bleach' a sheep to white using bone meal before re-coloring it.

Crafting
Wool can be crafted from string if required. However, as sheep are much easier to collect from than spiders are to kill, doing so may be a waste of resources. But with the Adventure update, string can be collected very easily for beds for use underground.

Naturally generated


Black wool blocks can also be found naturally in NPC villages where they lie on top of a fence post, surrounded by 4 torches.

54 orange wool blocks and 1 blue wool block are naturally generated as part of a Desert Temple. (As of 14w03a, stained clay generates in desert temples instead.)

Usage
Because of the variety of colors in which wool is available, many players use it to build colorful buildings, statues and other structures, especially in Creative mode. Wool is commonly used as decoration, as carpeting in houses and for large 'beds'. It can also be used to color-code a cave system by placing blocks at intervals so that you know which cave section you are in.

Wool can be used for color coding redstone circuits, to make it easier to find a wire or to separate one contraption from another. It acts as a solid block with no special behavior.

You may also trade wool to some farmer villagers for emeralds. You can give them any color of wool, but you can't give them more than one color at once.

Wild wolves can be located by looking for randomly dropped blocks of wool on the ground (especially in Forest or Taiga biomes) as wolves will kill sheep while roaming.

As a crafting ingredient
Note: Any color of wool or wood may be used for beds and paintings but it has no effect on the product's final appearance.

Trivia

 * The damage values for wool and their respective dyes are the inverse of each other. This is also true for Stained Glass and Stained Clay.
 * Shears do not take damage from destroying wool blocks. They're also the fastest tool to destroy already placed wool blocks.
 * White wool can be crafted together with bonemeal, but this merely "dyes" the already-white wool into another block of still-white wool.
 * On the Xbox 360 Edition Tutorial Map, the Minecraft Logo seen in the sky is made of Light Gray and Black Wool.
 * Using /give to obtain Wool with a Data Value of 16 will appear as White Wool in inventory. When placed, the data value is reset to 0.
 * Beyond that, obtaining wool with a DV of 17 or higher will wrap around to 1 again (i.e.: 17 gives orange, 18 gives Magenta) and appear like normal colored wool in the inventory.
 * Before leather was available, cloth was also used to craft leather armor.
 * Colored cloth was unobtainable during Classic's Survival Test and Indev unless they were pre-placed into the map file. Colored cloth blocks were completely removed from the code in Infdev. Placing these blocks on the map would cause the game client to crash, since the blocks no longer existed.
 * Obtaining the unused wool with damage value 16 as of Minecraft 1.5 will crash the game.
 * Black, Gray, Light Gray and Brown wool can only be obtained in Pocket Edition through natural colored sheep as there are no squids or Cocoa Beans to dye the wool. Even then, there is only a small chance to find Black, Gray, Light Gray and Brown dyed sheep. It is possible, but rare, to find a Pink colored sheep in Pocket Edition.
 * It is rarer to see a natural pink sheep than a zombie/skeleton with natural diamond armor. Both can be "faked", however.
 * The wool colors in Classic are brighter and more vivid. If you look closely at the file found in the History section, each color "blends in" with the last.
 * Wools can be dropped from the sheep when it dies.

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