Police raided the pizzeria on Saturday after receiving an anonymous tip that an animal was to be killed.
When police officers arrived at the scene the sheep had just been slaughtered in accordance with halal methods.
Slaughter of animals without the use of an anaesthetic is illegal. Although no arrests were made at the restaurant one man was handed over to border police.
Those involved are now suspected of cruelty to animals and breaching food safety regulations.
Food safety inspector Zygmund Cielsak told Radio Sjuhärad that it is not permissible to bring live animals onto premises where food is prepared. He also added that a pizzeria is clearly not an appropriate location for slaughter.
The pizzeria must now be decontaminated before food can be served there again.
The slaughtered sheep has been transported to a police freezer.