Sleep disorders are widespread in society and are prevalent in military personnel and in Veterans. Disturbances of sleep and arousal mechanisms are common in neuropsychiatric disorders such as schizophrenia, post-traumatic stress disorder, anxiety and affective disorders, traumatic brain injury, dementia, and substance use disorders. Sleep disturbances exacerbate suicidal ideation, a major concern for Veterans and in the general population. These disturbances impair quality of life, affect interpersonal relationships, reduce work productivity, exacerbate clinical features of other disorders, and impair recovery. Thus, approaches to improve sleep and modulate arousal are needed. Basic science research on the brain circuitry controlling sleep and arousal led to the recent approval of new drugs targeting the orexin/hypocretin and histamine systems, complementing existing drugs which affect GABA receptors and monoaminergic systems. Non-invasive brain stimulation techniques to modulate sleep and arousal are safe and show potential but require further development to be widely applicable. Invasive viral vector and deep brain stimulation approaches are also in their infancy but may be used to modulate sleep and arousal in severe neurological and psychiatric conditions. Behavioral, pharmacological, non-invasive brain stimulation and cell-specific invasive approaches covered here suggest the potential to selectively influence arousal, sleep initiation, sleep maintenance or sleep-stage specific phenomena such as sleep spindles or slow wave activity. These manipulations can positively impact the treatment of a wide range of neurological and psychiatric disorders by promoting the restorative effects of sleep on memory consolidation, clearance of toxic metabolites, metabolism, and immune function and by decreasing hyperarousal.