Guanacos (Lama guanicoe) are the only wild ungulate species widely distributed across the Patagonian steppe and have undergone a precipitous population decline since the introduction of domestic sheep (Ovis aries) 100 years ago. There has been speculation that sheep ranching may have played a major role in guanaco population decline after monopolising the most productive land because of competition for forage plants. Our aim in this work was to estimate guanaco abundance and account for its variation across nine different sites, two seasons and two years. We conducted over 100 ground surveys of both guanacos and sheep and estimated the availability of the preferred plant species both animal species might select in their diet. We found that (1) sheep densities were up to 23 times higher than guanaco densities in sympatric conditions, (2) at a protected site without sheep, guanaco density was one order of magnitude higher than at the rest of the sites, (3) across nine different sites, sheep densities alone accounted for around 60% of the variation in guanaco abundance, (4) guanaco densities were negatively related to both total plant cover and availability of the preferred plant species in their diet, which were both positively associated with sheep density, and (5) within-site changes in guanaco densities between seasons and years were negatively related to changes in sheep densities. Our results are consistent with predictions on interspecific competition for food resources, although we cannot rule out possible effects of other human-related activities influencing guanaco abundance. We conclude that sheep compete with guanacos for forage in arid Patagonia.