Two experimental periods were employed to investigate the fate of ingested CT from BT and their effects on the intake, digestibility, and N balance in lambs fed diets differing in CP levels. In period 1, 24 lambs were fed a basal diet either treated with polyethylene glycol (PEG+) to deactivate CT or without polyethylene glycol (PEG−). In period 2, the same lambs were used in a 2 × 2 factorial design and fed either the basal diet (BP) or a high protein diet (HP), again treated with or without PEG. In both experimental periods, feeding lambs diets without PEG caused a reduction in the dry matter (DM) intake and an increase in the DM digestibility. Urinary and total N excretion decreased in lambs fed diets without PEG, but only in absolute terms and not in relation to the N intake. The total N intake, total N excretion, and body N retention were higher with a higher dietary CP level. Related to the CT intake, less soluble and protein-bound CT were excreted by lambs fed diets without PEG, and more protein-bound and fiber-bound CT were excreted by lambs fed BP diets. Regardless of the PEG treatment and CP level, not all CT that are ingested are also excreted. The effect of PEG treatment on the N excretion pathway was independent of the CP level.