Behavioral arousal requires integration of multiple neurotransmitter and neuromodulatory systems. Identifying these systems is the key to not only a better understanding of the neurobiology of sleep/wakefulness but may also lead to the discovery of potential therapeutic targets for various sleep disorders. We review here a novel arousal promoting neuropeptide system, neuropeptide S (NPS) and its receptor. Pharmacologically, NPS activates NPS receptors at low nanomolar concentration to increase concentrations of intracellular Ca(2+). Anatomically, both NPS precursor and receptor mRNAs are found predominately in the central nervous system. NPS precursor mRNA is expressed only in several discrete regions located mainly in the brainstem. In particular, it is highly expressed in a previously undescribed group of neurons localized between locus coeruleus and Barrington's nucleus. NPS receptor mRNA is widely distributed in many brain areas with high expression levels in cortex, hypothalamus, amygdala and multiple midline thalamic nuclei. Functionally, central administration of NPS increases locomotor activity in both naïve and habituated mice. It also significantly increases wakefulness and decreases paradoxical (rapid eye movement) sleep and slow wave sleep in rats. In addition, NPS suppresses anxiety-like behaviors in mice exposed to different behavioral paradigms measuring responses to novelty or stress. These studies indicate that the NPS system is a newly discovered transmitter system that regulates vigilance and emotional states. NPS appears to possess a unique pharmacological profile in producing both anxiolytic-like and hypervigilant effects.