We evaluated the impacts of substituting cottonseed meal (CSM) and sorghum grain (SG) with dried distillers` grains with solubles (DDGS) in lamb feedlot diets on the dry matter intake (DMI), the growth performance, blood serum analysis, feces phosphorus (P) and nitrogen (N), wool production and quality, carcass traits, adipose tissue fatty acid profiles, and sensory panel tests. For 72 d, Rambouillet wether lambs (n = 44, initial body weight, BW = 28.8 ± 3.3 kg) were individually fed ad libitum pelleted diets containing DDGS that replaced 0% (0DDGS), 25% (25DDGS), 50% (50DDGS), or 75% (75DDGS) of the CSM and SG in a completely randomized design trial. Linear and quadratic effects of DDGS levels on the response variables were analyzed. Treatment × day interactions (P < 0.001) were observed for BW and DMI. As the DDGS level was increased, DMI (from d 21 to d 70), lamb BW (from d 56 to d 70), average daily gain, blood urea nitrogen and P, and fecal P linearly increased (P ≤ 0.05). Fecal N quadratically increased (P = 0.01), but no effects were found for gain:feed, blood insulin-like growth factor-1, or calcium. No differences in wool production or most of the wool quality parameters were detected. Adipose tissue stearic acid linearly increased (P = 0.02), linoleic acid quadratically increased (P = 0.01), and oleic acid tended to quadratically decrease (P = 0.08) as the DDGS increased in the diets. Increasing the DDGS level in the diets quadratically increased the hot carcass weight (P = 0.02), backfat thickness (P = 0.04), and body wall thickness (P < 0.001) while having no impact on the longissimus muscle area. As the DDGS increased in the diet, juiciness, tenderness, and overall acceptability linearly increased (P ≤ 0.05), while having no effect on the cook-loss, flavor intensity, or off-flavor detectability. Replacing 50% of CSM and SG with DDGS improved growth performance and enhanced the carcass and meat quality.