A New Zealand family are shocked that a market stall is giving away sex toys as prizes, after their young daughter won a blow-up sheep at a fair on the weekend.

The girl's grandfather, Allan Goodman, her mother, Nicola Quinn, and grandmother, Angela Quinn, were stunned when their seven-year-old appeared in their living room yesterday morning, holding her prize.

Nicola Quinn with the sex toy her seven-year-old daughter won at an arts and crafts fair. Credit:Marion van Dijk

She had won it from Sturgeon Amusements, a market stall at the fair in their hometown of Nelson, on New Zealand's South Island, on Sunday.

The sheep, sporting a French maid's bonnet and with beguiling long-lashed blue eyes, was "disgusting", Angela Quinn said.