The team, reporting in Current Biology, found a cluster of thousands of cells that could exist in either a “summer” or “winter” state.
They use the lengthening day to switch more of them into summer mode and the opposite when the nights draw in.
The annual clock controls when animals breed and hibernate and in humans may be altering the immune system.
A team from the Universities of Manchester and Edinburgh analysed the brains of sheep at different times of the year.
They found a cluster of 17,000 “calendar cells” in the pituitary gland, which sits at the base of the brain, and releases hormones that control processes throughout the body.
The research team say the cells have a “binary system” like a computer that can exist in one of two states – they can either produce “winter” chemicals or “summer” ones.
And the proportion of the calendar cells in each state changes throughout the year to mark the passage of time.
“It looks like there’s a short period of the year in the middle of winter and the middle of summer when they are all in one state or the other,” Prof Andrew Loudon from the University of Manchester told the BBC.