Police said that 12 people were arrested in a series of incidents that began when activists used kayaks and inflatable boats to attempt to prevent the Al Messilah livestock transport ship from entering Devenport in Tasmania.
After the initial attempt failed, some of the 40 demonstrators then chained themselves to the ship's gangway while others lay down in front of trucks delivering the first sheep to the harbour for export to Kuwait.
The Australian group Animal Liberation said the activists wanted to spare the sheep a two-week "journey of suffering".
"The sheep face a long and arduous journey ending in ritual slaughter in Kuwait and the United Arab Emirates, countries where there are absolutely no animal welfare safeguards against appalling handling and unbelievably cruel slaughter methods," the group said in a statement on Saturday.
A police spokesman said officers would remain at the wharf to ensure "that public order is maintained and the roadway remains clear and free of obstruction to facilitate the movement of traffic whilst ensuring the safety of protesters".
Protests against the trade in live animals reached a peak in August 2003 when Saudi Arabia turned away the MV Cormo Express with its load of 57,000 sheep, saying they had scabby mouth disease.
After almost three months at sea in confined conditions and against a background of outraged protests from animal welfare activists, about 44,000 surviving sheep were donated to the impoverished African nation of Eritrea.
Australia then banned further live exports to Saudi Arabia, but lifted the ban last year. The live sheep trade with Saudi Arabia was worth $78 million in 2003.