It has been established in the course of the past decade that the level of arousal at any time reflects an intricate interplay between a number of distinct wakefulness-promoting and sleep-promoting nuclei located in the hypothalamus/thalamus and brainstem. All these nuclei are associated with distinct neurotransmitters. Wakefulness-promoting nuclei include the tuberomamillary nucleus (histamine) and the lateral hypothalamic/perifornical area (orexin) of the hypothalamus, the intralaminar neurones of the thalamus (glutamate), and a number of monoaminergic nuclei in the brainstem (raphe nuclei: serotonin, locus coeruleus: noradrenaline, ventral tegmental area of mid-brain: dopamine), and the pedunculo-pontine tegmental nucleus (PPT: acetylcholine). The major sleep-promoting nucleus is the ventrolateral preoptic nucleus of the hypothalamus (VLPO) utilising GABA. During wakefulness the wakefulness-promoting nuclei are active, whereas the VLPO is quiescent, and the reverse pattern operates during sleep. While the VLPO is active during slow-wave sleep, rapid eye movement sleep is associated with the activation of some cholinergic neurones in the PPT. The alternation between states of wakefulness and sleep shows a circadian pattern, which is regulated by the “internal clock” of the hypothalamus (suprachiasmatic nucleus (SCN)). Light has a profound effect on the sleep/wakefulness cycle by aligning it to the night/day cycle (“photoentrainment”). Light also has a direct acute effect on the level of arousal, being sleep-promoting in nocturnal animals and wakefulness-promoting in diurnal animals. The effect of light on the level of arousal is mediated by the recently discovered intrinsically photosensitive ganglion cells of the retina, which operate via the photopigment melanopsin. These ganglion cells give rise to the retino-hypothalamic tract, which projects to the VLPO and the SCN. The SCN, on the other hand, sends excitatory projections to some wakefulness-promoting nuclei (locus coeruleus, orexin neurones of the lateral hypothalamus). In both nocturnal and diurnal animals the stimulation of the VLPO via light has a sleep-promoting effect, which, however, is likely to be superseded by the wakefulness-promoting effect of the stimulation of the SCN in diurnal animals. Light exerts an additional alerting effect by inhibiting the synthesis of the sleep-promoting hormone melatonin. Drugs can modify the activity of the sleep/arousal network by interacting with either sleep-promoting or wakefulness-promoting neurones. Agonists of the sleep-promoting system reduce and antagonists increase the level of arousal, whereas agonists of the wakefulness-promoting system increase and antagonists decrease the level of arousal. Thus, for example, drugs used for the treatment of insomnia are either agonists of the GABA-containing sleep promoting system, or antagonists of the monoaminergic and orexinergic wakefulness-promoting arousal systems.