The relevant factors in sleep-awakening mechanism and research progress in its regulation with Chinese medicine are reviewed. With the development of neuroanatomy, pharmacology and molecular biology, it has been found that sleep-awakening mechanism is related to many factors, such as the thalamus-pituitary-adrenal axis, the melatonin system, dopamine, 5-hydroxytryptamine, neuropeptide, acetylcholine and gamma-aminobutyric acid etc. Recipes in TCM like Modified Sini Powder and Modified Xiaoyao Powder can influence the sleep-awakening mechanism by regulating hormone levels and neurotransmitters.