Sleep disturbance is often a prominent symptom in adolescents diagnosed with major depressive disorder (MDD). Recent evidence indicates that short-term psychoanalytic psychotherapy (STPP) for depression may have an effect in reducing co-occurring sleep disturbance in youth. It is unknown if transference work (exploration of the patient-therapist relationship) has an additional effect in reducing sleep disturbance. Adolescents aged 16-18 years ( = 69, 84% female) who met diagnostic criteria for MDD based on the Mini International Neuropsychiatric Interview (M.I.N.I) were randomized to either STPP with transference work or without. Sleep problems were assessed at baseline, therapy session 20 (20 weeks), post-treatment (28 weeks), and one-year follow-up (80 weeks) with the Symptom Checklist-90-R. At baseline, 69% of the adolescents exhibited moderately to extreme sleep difficulties. Sleep disturbance was significantly correlated to depression depth at session 20 and at follow-up. Symptoms of insomnia significantly decreased from baseline to the end of treatment. Treatment gains were maintained until follow-up. No differences in recovery of sleep disturbance were found between the two treatment groups. The findings suggest that sleep disturbance improves following STPP for depression, with or without transference work. Future research should assess those with residual symptoms by different sleep measures.