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.
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. Koala sheep care very little about their surroundings and are in no way afraid or intimidated by humans, even to the point where they seemingly do not mind being used as pillows.
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.