Extensive livestock systems face complex issues balancing their maintenance with environmental and wildlife conservation. This is illustrated by the wolf conservation measures in the extensive sheep production areas of the Basque region (Spain). The real effectiveness of the compensation payments has to be analysed, and it may be that their current level compromise the production system. The actual level of economic damage to farmers must be quantified to accomplish trade-offs between wolf and extensive systems. This project aims to provide guidelines to manage livestock and wolf populations in the Basque Country at farm/landscape levels. Its interdisciplinary approach includes farmer-participatory techniques and economic-ecological analysis and modelling. It integrates economic optimisation of livestock production with GIS-based predictive modelling of wolf movements and of wolf-livestock interactions. This integration will allow area-specific predictions to be made of changes in wolf populations and-or sheep management practices on the economic impact of wolf predation on sheep.