Patients with chronic pain often complain of pain when they wake at night, but the accuracy of their perception of the pain after waking at night is unknown. While cognitive functions are reduced for a short time after waking from sleep, a situation known as sleep inertia, it is unclear how sleep inertia may affect the perception of pain. We investigated the effects of sleep inertia on the perception of experimentally induced pain. Fourteen male volunteers were exposed to a randomized thermal heat stimulus of 43.1 °C ‘hot’ and 46.5 °C ‘hurting’ during provoked waking from Stage 2 sleep, slow wave sleep and rapid eye movement (REM) sleep. Subjects rated their pain on awakening on a Visual Analogue Scale at 30 s after awakening and each minute thereafter for 5 min. We found no change in pain perception over the 5-min period irrespective of temperature used or sleep stage. However, perceived pain when awoken abruptly from REM sleep was significantly lower than the awake score for both the hot (P = 0.0069) and hurting (P = 0.0025) temperatures. Pain perception when woken from Stage 2 sleep or slow wave sleep was not significantly different from perception when awake. Our findings indicate that sleep inertia reduces pain perception when awoken abruptly from REM. This suggests that patients who wake up in pain either perceive accurately the pain they are experiencing, or at worst underestimate the level of pain if woken from REM sleep.