In 1993-1998 the lichen flora of Stora Karlso and Lilla Karlso was surveyed. These two nearby islands are situated outside the west coast of Gotland, Sweden, in the Baltic Sea. In all, 355 species were found, including three lichenicolous fungi. Two species are new to Sweden, viz. Lepraria flavescens and Placynthium lismorense. Both were found on limestone. The number of species according to habitat was: limestone 105, gravel alvar 84, grass alvar 17, siliceous rocks 88, sea-shore rocks 20, bark (mostly deciduous trees) 121 and wood 52. During the last hundred years the management and thereby plant succession have differed between the islands. Sheep has continuously grazed Lilla Karlso, while the sheep were removed in 1887 from Stora Karlso. Floristic differences of the lichen flora between the islands are discussed from this aspect. The succession of deciduous forest on Stora Karlso is important for the species composition of the epiphyte flora. Some phytogeographical aspects are also discussed. Several common lichen species in southern Sweden are rare or not found on Stora Karlso and Lilla Karlso, e.g. the sorediate species Buellia griseovirens, Pertusaria amara and Phlyctis argena. In contrast, the otherwise rare calcicolous Gyalecta subclausa is common on the islands. With the aim of studying the lichen flora of gravel alvar in detail, this habitat was surveyed in sample-plots. The overall species richness of the gravel alvar is higher on Stora Karlso, mainly due to the larger area of this habitat. The mean species richness in the sample-plots is however similar on both islands, with on average 15 species/dm2. The most species-rich dm2 sample-plot with 23 species was encountered on Stora Karlso. The species composition of the gravel alvar differs between the islands; e.g. on Stora Karlso Collema tenax, Fulgensia fulgens, Psora decipiens and Squamarina cartilaginea are more abundant. This may be caused by different management regimes. However, it is hard to distinguish the effects of differences in habitat area, habitat quality and sheep grazing. The most obvious effect of grazing on the terricolous lichens is the change of growth form of the Cladonia species. This was seen both by a comparison of the lichen individuals of the two islands and by following the macrolichens in an area where sheep were re-introduced on Stora Karlso in 1995. Cladonia arbuscula, C. portentosa and C. rangiferina grow in dense cushions in areas without sheep, while they grow scattered in areas with sheep. This is probably caused by the mechanical action of sheep trampling.