In this study, we examined whether dietary ADY improves growth, digestibility of feed nutrients, meat quality, and rumen microbial ecology in lambs. This experiment enrolled 90 healthy, similarly weighted (29.0 ± 0.5 kg) four-month-old Duhan lambs, which were randomly and evenly distributed into two treatment groups: a control group fed the basal diet and an ADY group fed the basal diet supplemented with 0.3 g/d per lamb of active dry yeast. The supplementation amount was adjusted weekly according to feed intake to maintain a constant daily dose. The results showed that, compared with the control group, ADY significantly increased the lambs’ average daily gain (ADG) and enhanced the apparent digestibility of neutral detergent fiber (NDF), crude protein (CP) (p < 0.05), and significantly reduced the feed conversion ratio (F/G) (p < 0.05). These improvements were accompanied by a shift in rumen fermentation toward propionate production, evidenced by higher NH₃-N, Total volatile fatty acids (TVFAs) and propionate proportion and a lower acetate proportion and acetate-to-propionate ratio (p < 0.05). ADY also altered the rumen microbiota, increasing Proteobacteria and Succinivibrionaceae_UCG-001 while decreasing norank_o_Clostridia_UCG-014 (p < 0.05). In muscle, ADY significantly increased the proportions of C14:0 and C18:3n-3 (p < 0.05). In addition, the proportion of C13:0, C18:0 and C18:2n-6t were significantly reduced (p < 0.05). In conclusion, dietary supplementation with ADY enhanced rumen fermentation, improved rumen microbial composition, and promoted nutrient utilization in lambs, thereby improving growth performance and meat quality. In addition, certain rumen microbial taxa may be associated with the formation of specific muscle fatty acids.