Microwave (MW) treatment has been suggested to improve forage hays' nutritive value and sheep growth performance. However, the extent to which the MW-treated forage hay affects apparent digestibility and nitrogen partitioning is not documented. This study examined the potential to use the MW as a novel thermal treatment to improve forage hay intake, digestibility, and nitrogen utilisation of sheep. A total of 24 merino rams (18 months of age, 42 ± 2.0 kg initial body weight) were randomly divided into four dietary treatments: Control lucerne hay (CLH), MW-treated lucerne hay (MLH), Control wheat hay (CWH), and MW-treated wheat hay (MWH). The study had 14 days adaption and 7 7-day sample collection period, with 6 sheep replicates/treatment. Feed, faeces, urine, and blood plasma samples were collected. Higher dry matter (DM) intake was observed in MLH vs. CLH (P < 0.001). The DM and organic matter digestibility both increased by 8% in MLH compared to CLH (P <0.001). The digestibility of neutral detergent fibre (NDF), acid detergent fibre (ADF), and nitrogen increased by 12%, 9%, and 10%, respectively in MLH compared to CLH (P < 0.001). The MLH-feed sheep showed higher nitrogen retention (P = 0.037) and microbial nitrogen synthesis (P = 0.047) compared to CLH-fed sheep. A limited effect was observed in CWH vs. MWH, with only ADF digestibility (P = 0.023) and plasma glucose (P < 0.05) being higher in sheep fed with MWH. Electron microscope images showed clear cell microstructure destruction (P <0.001) due to MW treatment in lucerne hay but there was no difference observed in wheat hay. The result provided first-hand comprehensive data to quantify MW treatment's effect on hay quality and sheep performance, with potential mechanisms explained underpinning the observed changes.