The sheath is made up of soft and loose folds of tissue that allow the penis to drop and retract. Because of its many loose folds and its location on the lowest part of the body, it swells readily as a response to many conditions. The sheath also often becomes very fatty in overweight and insulin resistant horses. Sometimes distinguishing between a fat sheath and a swollen sheath can be difficult.

Sheaths also swell as a result of being "dirty." Horses with large beans (accumulations of secretions at the end of the penis) and large accumulations of sheath smegma (normal pasty secretion) often swell. Horses that urinate into their sheaths tend to have dirtier sheaths and more problems with swelling. Trauma, skin allergy and irritation as well as insect stings are examples of conditions that cause sheath swelling by irritation to the outer skin.

Sheath and penis skin infections and tumors cause swelling by irritation of the internal, hidden tissues. Commonly, injuries to the abdomen and even the upper limbs can cause local swelling that spreads over a distance through tissue planes and ultimately fills the sheath. Finally, the sheath is an indicator of general disease states such as low blood protein and vasculitis (inflammation of blood vessels that allow them to leak fluid into the tissues).