A clinically relevant sleep-wake disturbance is found in up to half the patients with dementia, and the sundowning agitation is a common cause of institutionalisation of demented geriatric patients. The circadian rhythm of demented patients is levelled off with increased daytime sleep and disrupted night sleep. Particularly in vascular dementia, Korsakow syndrome, Parkinson's disease, and depression the alteration of sleep architecture may be pronounced, whereas in Alzheimer's disease prominent hypersomnolence or insomnia is typically only found in later stages of the diseases. Greatly increased daytime sleepiness or striking insomnia at the very beginning of suspected dementia should thus prompt the search for other, possibly treatable causes of dementia. Neuropathological and neurophysiological studies support the hypothesis of a deteriorated hypothalamic suprachiasmatic nucleus (harbouring the biological clock) as a cause for the deranged circadian sleep-wake system in dementia. Management of sundowning behaviour includes restriction of daytime sleep, exposure to bright lights, and social interaction schedules during the day. The benzodiazepines and analogues usually not being sufficiently effectual, low doses of mild neuroleptics are often needed. Whether recent reports on efficacy of melatonin in elderly insomniacs also apply to demented patients is yet uncertain. The careful search and treatment of possible extracerebral physiologic factors causing reversible hypersomnia or insomnia is an important requisite. Polysomnographic studies are needed to recognise treatable sleep disturbance which could deteriorate or mimic dementia and sundowning. Particularly, a sleep-apnea-hypopnea syndrome must be searched for at the beginning of a suspected dementia, when successful treatment is still possible. Sleep studies should also identify periodic leg movements of sleep with restless legs and/or increased daytime sleepiness, and hyperkinetic parasomnias such as REM sleep behaviour disorder which may complicate or imitate sundowning.