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Breed formation can roughly be divided into two classes: 1) separation from a main population or 2) created through cross breeding. Many breeds originate from a larger population. The new to be created breed has a special feature that was already present in the population of origin. Often selection by a few breeders in the original population has already been performed for that special feature for some generations. If the subpopulation of the new breed is of sufficient size, the genetic diversity in those separated breeds generally is not much lower than in the original population. Such new breed formation is a continuous process and new breeds are also being developed today. An example of the creation of a breed with a special feature out of an existing breed is the Dutch Deep Red cattle created out of the Meuse Rhine IJssel breed.

Instead of separation of from a larger population, breeds can also be developed by specific cross breeding. In commercial pig and poultry breeding the pure lines consist of multiple breeds and form so called hybrids: combinations of breeds that are crossed. In dogs many breeds are created by crossing other breeds. In farm animals this generally is not called a breed, but a line or hybrid or synthetic. Because it was based on combination of breeds (populations), rather than individuals, the genetic diversity is still fairly large.

In hobby breeds, sometimes the created breeds are based on a very few number of founder animals. These few animals are crossed and the resulting offspring are mated again, so that the genetic diversity of those breeds is very limited. The Saarloos Wolfhond is an example of such breed with a very small number of founders.