In the last two decades considerable progress has been made in defining sleep changes in mental disorders, as well as in studying the relationship between sleep and psychiatric treatments. The pathophysiological significance of those changes has also been investigated, with some theoretical models of mental disorders indicating a direct role of sleep. In psychiatric research, sleep studies have contributed to the clarification of a variety of issues in relation to taxonomy, aetiology, pathogenesis and treatment. Furthermore, clinical and EEG aspects of sleep have proven useful for practical diagnostic and treatment purposes. This article aims to provide a systematic and critical review of current applications of sleep studies in psychiatry, both in research and clinical fields.