Over the last years, a large body of evidence has accumulated showing that complaints of disordered sleep are quite prevalent in the community. Insomnia is by far the most common disturbance and is often associated with concurrent psychiatric illness, in particular anxiety and mood disorders. On the other hand, sleep complaints are frequently present among psychiatric patients and have been incorporated in the official diagnostic criteria for many mental disorders, such as major depression, post-traumatic stress disorder, generalized anxiety disorder and substance-related disorders. Estimates of the prevalence of sleep disorders diverge widely, because these disorders have been variously conceptualized. Currently, however, three different classifications for sleep disorders establish reliable diagnostic criteria and allow for more consistency in clinical research. In particular, the ICD-10 diagnostic criteria for insomnia helped to establish a consensus among sleep specialists by defining accurately this clinical condition, i.e. by conceptualizing it as the subjective complaint of insufficient or non-restorative sleep, which is the important feature, not the actual amount of time spent asleep. Alongside the evolution of taxonomic systems, the development of specific diagnostic tools, such as rating scales for measuring clinical manifestations of sleep disorders, has contributed significantly to the growth in the field. For instance, the risk factors responsible for the development of chronic insomnia, its consequences, and the complex relationship between insomnia and psychopathology, have been considerably clarified. In terms of the polysomnographic aberrations observed in various mental disorders, these, although proven not to be pathognomonic for any of them, have been considerably refined over the last decade, and certain general sleep patterns for some specific disorders have emerged. Finally, substantial advances have been made in the elucidation of the neuropsychobiological substrate of disturbed sleep. Thus, hyperarousal has been identified as the cardinal feature of chronic insomnia, which is associated with an around-the-clock activation of both major components of the stress system, the hypothalamic-pituitary-adrenal axis and the sympathetic nervous system.