Obesity and inadequate sleep are among the most common causes of health problems in modern society. Thus, the discovery that orexin (hypocretin) neurons play a pivotal role in sleep/wake regulation, energy balance, and consummatory behaviors has sparked immense interest in understanding the regulatory mechanisms of these neurons. The local network consisting of neurons and astrocytes within the lateral hypothalamus and perifornical area (LH/PFA), where orexin neurons reside, shapes the output of orexin neurons and the LH/PFA. Orexin neurons not only send projections to remote brain areas but also contribute to the local network where they release multiple neurotransmitters to modulate its activity. These neurotransmitters have opposing actions, whose balance is determined by the amount released and postsynaptic receptor desensitization. Modulation and negative feedback regulation of excitatory glutamatergic inputs as well as release of astrocyte-derived factors, such as lactate and ATP, can also affect the excitability of orexin neurons. Furthermore, distinct populations of LH/PFA neurons express neurotransmitters with known electrophysiological actions on orexin neurons, such as melanin-concentrating hormone, corticotropin-releasing factor, thyrotropin-releasing hormone, neurotensin, and GABA. These LH/PFA-specific mechanisms may be important for fine tuning the firing activity of orexin neurons to maintain optimal levels of prolonged output to sustain wakefulness and stimulate consummatory behaviors. Building on these exciting findings should shed further light onto the cellular mechanisms of energy balance and sleep-wake regulation.