The "non-specific" ventromedial thalamic nucleus (VM) has long been considered a candidate for mediating cortical arousal due to its diffuse, superficial projections, but direct evidence was lacking. Here, we show in mice that the activity of VM calbindin1-positive matrix cells is high in wake and REM sleep and low in NREM sleep, and increases before cortical activity at the sleep-to-wake transition. Optogenetic stimulation of VM cells rapidly awoke all mice from NREM sleep and consistently caused EEG activation during slow wave anesthesia, while arousal did not occur from REM sleep. Conversely, chemogenetic inhibition of VM decreased wake duration. Optogenetic activation of the "specific" ventral posteromedial nucleus (VPM) did not cause arousal from either NREM or REM sleep. Thus, matrix cells in VM produce arousal and broad cortical activation during NREM sleep and slow wave anesthesia in a way that accounts for the effects classically attributed to "non-specific" thalamic nuclei.