Posttraumatic stress disorder (PTSD) is a debilitating and common consequence of military service. PTSD is associated with increased incidence of mood disturbances (e.g., anxiety). Additionally, veterans with PTSD often have poor-quality sleep and poor emotion regulation ability. We sought to assess whether such sleep and emotion regulation deficits contribute to mood disturbances. In 144 veterans, using a double moderation model, we tested the relationship between PTSD and anxiety and examined whether sleep quality and emotion regulation interact to moderate this relationship. We found that PTSD predicts higher anxiety in veterans with poor and average sleep quality who utilize maladaptive emotion regulation strategies. However, there was no relationship between PTSD and anxiety in individuals with good sleep quality, regardless of emotion regulation. Similarly, there was no relationship between PTSD and anxiety in individuals with better emotion regulation, regardless of sleep quality. Results were unchanged when controlling for history of traumatic brain injury (TBI), despite the fact that those with both PTSD and TBI had the poorest emotion regulation overall. Taken together, these results suggest that good-quality sleep may be protective against poor emotion regulation in veterans with PTSD. Sleep may therefore be a target for therapeutic intervention in veterans with PTSD and heightened anxiety.