Post-traumatic stress disorder (PTSD) is characterized by intrusive memories of a traumatic event, avoidance behavior related to cues of the trauma, emotional numbing, and hyper-arousal. Sleep abnormalities and nightmares are core symptoms of this disorder. In this review, we propose a model which implicates abnormal activity in the locus coeruleus (LC), an important modifier of sleep-wake regulation, as the source of sleep abnormalities and memory abnormalities seen in PTSD. Abnormal LC activity may be playing a key role in symptom formation in PTSD via sleep dysregulation and suppression of hippocampal bidirectional plasticity.