While staying at the Black Cliffs, Katara awoke one night to witness Aang anxiously pacing around a flock of koala sheep after having experienced a nightmare. Later, during a therapy session with Sokka, Aang lay down, using a koala sheep as a pillow; he was told by Sokka to scream into another koala sheep as a means of releasing his pent-up stress.
Later, Team Avatar sheared several koala sheep and used their collective wool to create a makeshift cot for Aang to sleep on.[1]
The koala sheep has the woolly body of a sheep and the ears, feet, and face of a koala. The wool is extremely comfortable, usable as cushioning in a bed.
The koala sheep is extremely docile and spends most of the day eating grass, sleeping, and avoiding its natural predator, the boar-q-pine.[2] Koala sheep care very little about their surroundings and are in no way afraid or intimidated by humans,[3] even to the point where they seemingly do not mind being used as pillows.[1]
The koala sheep is a cross between its namesake. The fact that it likes to spend most of its time eating and sleeping is a clear connection to the real life koala, as this creature is only awake for five hours a day and spends about three of those eating. In addition, the herding behavior that koala sheep exhibit is reminiscent of real-life sheep.