Most sedative-hypnotics used in insomnia treatment target the γ-aminobutyric acid (GABA)A receptors. A vast repertoire of GABAA receptor subtypes has been identified and displays specific electrophysiological and functional properties. GABAA-mediated inhibition traditionally refers to ‘phasic’ inhibition, arising from synaptic GABAA receptors which transiently inhibit neurons. However, there is growing evidence that peri- or extra-synaptic GABAA receptors are continuously activated by low GABA concentrations and mediate a ‘tonic’ conductance. This slower type of signaling appears to play a key role in controlling cell excitability. This review aims at summarizing recent knowledge on GABA transmission, including the emergence of tonic conductance, and highlighting the importance of GABAA receptor heterogeneity. The mechanism of action of sedative-hypnotic drugs and their effects on sleep and the electroencephalogram will be reported. Furthermore, studies using genetically engineered mice will be emphasized, providing insights into the role of GABAA receptors in mechanisms underlying physiological and pharmacological sleep. Finally, we will address the potential of GABAA receptor pharmacology for the treatment of insomnia.