Insomnia commonly occurs along with other psychiatric disorders. I aim to address two issues that arise from this observation. First, insomnia is commonly assumed to be epiphenomenal to the so-called “primary” psychiatric disorder. On the basis of new evidence, I argue instead that insomnia may be an important but under-recognized mechanism in the multifactorial cause and maintenance of psychiatric disorders. Second, insomnia may be a transdiagnostic process—a process that is common across psychiatric disorders. The move to identify and study transdiagnostic processes contrasts with the standard “disorder focused” approach in which classification systems and research programs specialize in a single disorder. The latter approach can neglect the intriguing and potentially important similarities across disorders. If it were feasible to develop transdiagnostic treatments, the public health implications would be startling. Research on the role of sleep in psychiatric disorders and tests of the validity and utility of a transdiagnostic approach provide rich opportunities for improving our understanding of, and the treatment of, psychiatric disorders.