Recently, low levels of a newly identified neuropeptide, hypocretin 1, were described in the cerebrospinal fluid of patients with narcolepsy. This neurochemical finding furthers our understanding of this enigmatic sleep disorder typically characterized by excessive daytime sleepiness, cataplexy, sleep paralysis, and hypnagogic hallucinations. Narcolepsy appears to be fundamentally related to abnormally regulated rapid eye movement sleep. The diagnosis of this disorder remains challenging because of multiple other conditions that can cause daytime sleepiness and the difficulties in recognizing cataplexy based on patient report. The role of hypocretins in narcolepsy is unclear but intriguing because the cell bodies are restricted to the lateral hypothalamus, a brain region long associated with sleep regulation, with neuronal widespread projections to areas including the locus ceruleus, ventral tegmental area, amygdala, and dorsal raphe. Hypocretins potentially modulate the activity of monoamines and acetylcholine, and therefore their absence leads to the multiple symptoms of narcolepsy. This article reviews the current understanding of the diagnosis and treatment of narcolepsy and discusses the possible implications of the hypocretin discovery.