A £5.5M scheme to help sheep farmers tackle overgrazing and undergrazing has improved wildlife habitats on more than 101,000 acres, all Sites of Special Scientific Interest.

More than 380 farmers and land managers have signed up to English Nature's Sheep Wildlife Enhancement Scheme in the last two years and received grants to help them get the right balance to manage their sheep to the benefit of some of the country's most important wildlife sites.

The agreements include 77 with farmers on the North York Moors, where the scheme is contributing £250,000 a year to the local economy, rewarding good grazing and feeding practice.

More than £19,000 of the money has come from the North York Moors National Park Authority to help 20 farmers with their sheep gathering. Gathering areas have increased significantly since January 2000 and capital works have led to 19,000m of fencing being repaired to secure existing grazing hefts, with £7,000 to help with bracken control.

The North York Moors SSSI is one of England's finest wildlife sites for its moorland vegetation and birds and is home to the largest continuous area of heather in England.

The habitats are rare in the world and support scarce plants and insects as well as large numbers of breeding birds, including merlin, golden plover, curlew and snipe, and important populations of other birds such as lapwing, peregrine and red grouse.

Dave Clayden, senior conservation officer for English Nature, said the scheme had helped encourage existing graziers to keep up the good work they had been doing for many years.

"However, despite the scheme, the increasing age of graziers, coupled with the lack of a living wage, means hill-farming is not attractive to members of the younger generation," he said. "Over the past seven years we have seen a loss of three graziers a year, which continues to be of great concern for the future sustainability of these moors."

The scheme is also revitalising the Vale of York's lowland heaths, a wildlife-rich habitat which has depended on grazing by sheep since the Bronze Age.

Skipwith and Strensall Commons have seen increasing numbers of sheep, including rare black Hebridean sheep. The extra sheep are nibbling away tussocky grasses to make enough space for smaller and rarer wildflowers and insects to thrive.

The scheme has also provided a cash injection to help clear areas of heath being lost to invasion by birch scrub.

"Grazing is the biggest challenge facing SSSI management but schemes like this mean we can work with farmers to make a real difference," said Dr Andy Clements, English Nature's director of designated sites. "We are delighted with the number of farmers who have signed up to the scheme. We are pleased to operate a scheme which keeps farmers farming."

The scheme is based on the principle that getting the right type of grazing on SSSIs depends on the skills of farmers and land managers. By offering farmers practical support, like paying for shepherding and fencing, the scheme helps them manage wildlife habitats on their farms and provides capital to help develop their farm business and make it more viable.