Animal grazing in integrated crop-livestock systems (ICLS) results in continuous nutrient release to forage plants and crops in succession. This study aimed to assess sheep dung composition and decomposition rates under distinct grazing intensities and at different development stages of Italian ryegrass pasture (Lolium multiflorum Lam.), and to evaluate dung phosphorus (P) and potassium (K) release dynamics during two annual ICLS cycles (2015 and 2016) in southern Brazil. Treatments consisted of two grazing intensities (moderate and light) and two pasture development stages (vegetative and post-flowering), arranged in a randomized complete block design with split-split-plots and four replicates. Dry matter (DM) decomposition and P and K release rates were determined using litter bags with sheep dung. Grazing intensity did not affect sheep dung composition. Forage consumed at different development stages altered sheep dung composition, decomposition, and P and K release rates. Dung sampled at pasture vegetative stage showed P and K contents 16% and 7% higher, respectively, than dung from the post-flowering stage. Dung collected at pasture post-flowering stage had 26% more cellulose and 34% more hemicellulose compared to dung from the vegetative stage in 2016. P and K release was greater for dung from pasture vegetative stage, reaching 3.7 and 12.9 kg ha−1 of P and K, respectively. Further evaluations are still needed considering the quantification and release of nutrients in each of the different compartments (pasture, urine, and dung residues) that compose the system.