This mini-review article presents the remarkable progress that has been made in the past decade in our understanding of the neural circuitry underlying the regulation of sleep-wake states and circadian control of behaviors. Following a brief introduction to sleep architecture and physiology, the authors describe the neural circuitry and neurotransmitters that regulate sleep and cortical arousal (i.e., wakefulness). They next examine how sleep and wakefulness are regulated by mutual inhibition between sleep-and arousal-promoting circuitry and how this interaction functions analogously to an electronic "flip-flop" switch that ensures behavioral state stability. The authors then discuss the role of circadian and homeostatic processes in the consolidation of sleep, including the physiologic basis of homeostatic sleep drive (i.e., wake-dependent increase in sleep propensity) and the role of the SCN in the circadian regulation of sleep-wake cycles. Finally, they describe the hypothalamic circuitry for the integration of photic and nonphotic environmental time cues and how this integration allows organisms to sculpt patterns of rest-activity and sleep-wake cycles that are optimally adaptive.