Sleep is a fundamental biological process for all animals. However, the molecular mechanisms that regulate sleep are still poorly understood. Here we report that sleep-like behavior in Drosophila is severely impaired by mutations in sarah (sra), a member of the Regulator of Calcineurin (RCAN) family of genes. Sleep reduction in sra mutants is highly correlated with decreases in Sra protein levels. Pan-neural expression of sra rescues this behavioral phenotype, indicating that neuronal sra function is required for normal sleep. Since Sra regulates calcineurin (CN), we generated and examined the behavior of knock-out mutants for all Drosophila CN genes: CanA-14F, Pp2B-14D, and CanA1 (catalytic subunits), and CanB and CanB2 (regulatory subunits). While all mutants show at least minor changes in sleep, CanA-14F(KO) and CanB(KO) have striking reductions, suggesting that these are the major CN subunits regulating sleep. In addition, neuronal expression of constitutively active forms of CN catalytic subunits also significantly reduces sleep, demonstrating that both increases and decreases in CN activity inhibit sleep. sra sleep defects are suppressed by CN mutations, indicating that sra and CN affect sleep through a common mechanism. Our results demonstrate that CN and its regulation by Sra are required for normal sleep in Drosophila and identify a critical role of Ca(2+)/calmodulin-dependent signaling in sleep regulation.