Defining the relationship between sleep disturbances and psychiatric disorders is a thought-provoking task and is becoming even more challenging because it is apparent that insomnia is not simply a typical symptom of a psychiatric disorder but may actually be a predictor (or independent risk factor) for the development of such a condition. Studies have shown that depressed patients not only have disturbances in sleep continuity but have reduced slow wave sleep and disinhibited REM sleep. In particular, REM sleep regulation is characterized by shortened REM latency and increased REM density. It has been suggested that the reciprocal interaction between REM and nonREM sleep, driven by inhibitory aminergic and excitatory cholinergic activity, becomes unbalanced in depression. Exposure to cholinergic stimulants reduces REM latency, particularly in major depressive disorder. In fact, it has been shown that healthy individuals at high risk for developing depression have greater sensitivity to cholinergic stimulation than those not at high risk. While the causality of the insomnia-depression relationship is debated, epidemiological studies have indicated that insomnia is an independent risk factor for depression and other psychiatric disorders. As we learn more about the interplay between these pathophysiologies, we will be able to make better treatment decisions for our patients.