You would think, given its name, that the wolf-in-sheep’s-clothing would be some kind of deadly wolf camouflaged as a sheep.
You would be wrong. The wolf-in-sheep’s-clothing has fooled even you! You are flat-footed for the rest of the surprise round.
The wolf-in-sheep’s-clothing is an alien refugee from Gary Gygax’s famous 1e AD&D module S3 Expedition to the Barrier Peaks. The Bestiary 3 covers the basics—it's a hungry stump with tentacles that uses the corpse of something cute and fuzzy as a lure. And in Misfit Monsters Redeemed (which features a wolf-in-sheep’s-clothing on the cover), Colin McComb covers the monster’s possibilities in exhaustive detail.
I won’t repeat his work here, other than to note that he rightly identifies the wolf-in-sheep’s-clothing as a surprise that you only get to spring on a party once. So whether you deploy it in an alien spaceship or in the woods just outside of town, you want to make it count.
Why stop with squirrels? A wolf-in-sheep’s-clothing in the Mundiyanha Game Preserve uses the corpse of a rare pearlescent peacock as its lure. This could be a problem for adventurers if, for instance, they were sent to capture one of the rare birds alive and run afoul of the imposter instead…or if they best one of the aberrations in combat, only to have a game warden spot them loitering with gore-stained weapons over a peacock corpse…or if they accidentally kill one of the harmless birds, thinking it is another wolf-in-sheep’s-clothing…or all the above.
Atomies adopt a party of adventurers into their society—which has the side effect of shrinking them to less than a foot tall. It also means they run afoul of an aberrant secret society that reveres a wolf-in-sheep’s-clothing as a particularly hungry avatar of the Trickster. The alien creature is actually an immature specimen, but to the shrunken adventurers it seems positively enormous.
A doppelganger shadowdancer is absorbed in the study of camouflage as a discipline and as a means for questioning reality. His manor (courtesy of the last identity he stole) features a grotto whose statuary and furnishings are mimics…to distract from the wolf-in-sheep’s-clothing that is the real threat.
—Misfit Monsters Redeemed 58–63 & Pathfinder Bestiary 3 285
If you’re looking for the wolf, it’s hanging out with its dire cousin all the way back here.
If you’re looking for the dreaded death sheep (as well as the blink wooly mammoth), look in Dragon Magazine #156.