A sleep-promoting function for the rostral hypothalamus was initially inferred from the presence of chronic insomnia following damage to this brain region. Subsequently, it was determined that a unique feature of the preoptic hypothalamus and adjacent basal forebrain is the presence of neurons that are activated during sleep compared to waking. Preoptic area "sleep-active" neurons have been identified by single and multiple-unit recordings and by the presence of the protein product of the c-Fos gene in the neurons of sleeping animals. Sleep-active neurons are located in several subregions of the preoptic area, occurring with high density in the ventrolateral preoptic area (vlPOA) and the median preoptic nucleus (MnPN). Neurons in the vlPOA contain the inhibitory neuromodulator, galanin, and the inhibitory neurotransmitter, GABA. A majority of MnPN neurons activated during sleep contain GABA. Anatomical tracer studies reveal projections from the vlPOA and MnPN to multiple arousal-regulatory systems in the posterior and lateral hypothalamus and the rostral brainstem. Cumulative evidence indicates that preoptic area neurons function to promote sleep onset and sleep maintenance by inhibitory modulation of multiple arousal systems. Recent studies suggest a role for preoptic area neurons in the homeostatic aspects of the regulation of both rapid eye movement (REM) and non-REM (NREM) sleep and as a potential target for endogenous somnongens, such as cytokines and adenosine.