Most psychiatric disorders, such as schizophrenia, mood disorders, or neurotic disorders are associated with sleep disorders of various kinds, among which insomnia is most prevalent and important in psychiatric practice. Almost all patients suffering from major depression complain of insomnia. Pharmacological treatment of insomnia associated with major depression shortens the duration to achieve remission of depression. Insomnia has been recently reported to be a risk factor for depression. In patients with schizophrenia, insomnia is often an early indicator of the aggravation of psychotic symptoms. Electroencephalographic sleep studies have also revealed sleep abnormalities characteristic to mood disorders, schizophrenia and anxiety disorders. A shortened REM sleep latency has been regarded as a biological marker of depression. Reduced amount of deep non-REM sleep has been reported to be correlated with negative symptoms of schizophrenia. Recently, REM sleep abnormalities were found in teenagers having post-traumatic stress disorder after a boat accident. Although these facts indicate that insomnia plays an important role in the development of psychiatric disorders, there are few hypotheses explaining the cause and effect of insomnia in these disorders. Here, we reviewed recent articles on insomnia associated with psychiatric disorders together with their clinical managements.