To develop further perspective on the psychophysiology of generalized anxiety disorder and primary depression, all-night electroencephalographic (EEG) sleep measures in outpatients with diagnoses of generalized anxiety disorder and primary (nondelusional) depression were compared. Both groups had difficulty initiating and maintaining sleep, and diminished amounts of slow-wave sleep. Compared to patients with generalized anxiety disorder, depressives had a shorter rapid eye movement (REM) latency, greater REM sleep percent and eye movement activity, and a different temporal distribution of REM sleep. Anxious patients showed few changes from first to second night, whereas depressives showed increases in several REM sleep indexes. The combination of REM sleep latency and REM percent correctly classified 86.7% of patients. These data may provide a more direct measure of central nervous system arousal and sleep/wake function than previous studies in the psychophysiology of anxiety. They also lend support to the clinical distinction between generalized anxiety disorder and primary depression and to the classification of anxiety states as disorders of initiating and maintaining sleep.