Obstructive sleep apnea is increasingly recognized as a common and debilitating disorder. As a result, a variety of diagnostic technologies have evolved to potentially decrease cost and improve access and ease of assessment. In this study we compared the Healthdyne NightWatch (NW) System (a home sleep diagnostic methodology) to standard polysomnography (PSG) in two sleep centers. Two separate studies were completed. NW was compared to a simultaneously obtained PSG in 30 patients (IN-LAB study). Seventy additional patients were studied in both the home with NW and in the laboratory with PSG (HOME-LAB study). The NW system records eye movement, leg movement, SaO2, nasal-oral airflow, chest and abdominal wall motion, body position and heart rate on a solid state recorder, which permits sleep staging based on body and eye movement and standard respiratory assessment. For the PSG, standard paper recording techniques were used. The IN-LAB study revealed a correlation between NW and PSG for total sleep time of r = 0.72, with NW tending to score some awake time as nonrapid eye movement sleep. The correlation for apnea-hypopnea index (AHI) was r = 0.94 between systems, with a sensitivity of 100% and specificity of 63.6% at an AHI threshold of 10. The HOME-LAB study demonstrated understandably poor correlations between NW and PSG for most measures of sleep, which is likely a product of night-to-night variability in sleep, home versus laboratory effects and the differences in sleep staging methodology. However, the correlation for AHI was r = 0.92, with a sensitivity of 90.7% and a specificity of 70.4% at an AHI threshold of 10. Using a new methodology to assess agreement between diagnostic systems, we observed 78.6% diagnostic agreement between NW and PSG in the HOME-LAB study, with NW underestimating AHI 4.3% of the time and overestimating it in 17.1% of cases. This may relate to night-to-night variability in AHI or greater NW computer sensitivity to subtle hypopneas. We conclude that NW provides an accurate determination of AHI in both the home and laboratory, using limited instrumentation. The analysis time for NW is also reduced compared to PSG, and patients generally prefer the NW evaluation.