Research over the past two decades has led to the development of standardized EEG sleep methodology, which in turn has proven useful for identification of characteristic sleep abnormalities for the affective disorders. Application of shortened REM latency (less than 60 minutes for most populations) or combination of EEG sleep variables as psychobiologic markers for endogenous depression has produced an accurate, reliable, and objective laboratory method to aid in differential diagnosis of affective states. In clinical practice, this method is not presently practical as a routine screening test for all depressed patients, but is very useful to help evaluate complex or diagnostically difficult cases. Beyond its role as a diagnostic aid, EEG sleep studies show great promise as a research strategy to help elucidate the pathophysiology of affective disorders and to understand mechanisms of antidepressant response. Continued application and development of EEG sleep methodology should yield further advances in diagnosis and treatment of affective disorders.