Purpose of Review <p>This narrative review synthesises emerging evidence on the neurophysiological underpinnings of sleep disturbances across psychiatric disorders. Historically regarded as secondary symptoms, sleep disruptions are now increasingly conceptualised as mechanistic drivers of psychopathology. We advance a transdiagnostic framework for understanding how alterations in sleep microstructure and circadian regulation intersect with neural circuits implicated in major psychiatric syndromes.</p> Recent Findings <p>Electroencephalographic markers such as reduced sleep spindle density, slow-wave activity, increased cyclic alternating pattern rate, and changes in aperiodic slope, have demonstrated relevance across mood, anxiety, psychotic, and neurodevelopmental disorders. These sleep EEG phenotypes show associations with disrupted thalamocortical and frontolimbic circuitry, and may function as candidate biomarkers for diagnosis, prognosis, and treatment response. Neuroimaging and genomic studies further support a convergence of sleep-related mechanisms with affective and cognitive dysfunction. Targeted interventions, ranging from cognitive behavioural therapy for insomnia (CBT-I), to neuromodulation and circadian-phase shifting agents increasingly show promise in modulating sleep architecture and ameliorating psychiatric symptoms.</p> Summary <p>Sleep dysfunction constitutes a mechanistically embedded, transdiagnostic substrate in psychiatric illness. Integrating sleep metrics into precision psychiatry may facilitate early detection, stratification, and tailored interventions. We advocate for the routine inclusion of sleep assessments and biomarker-guided sleep interventions as essential components of psychiatric care. Such a shift holds promise not only for symptom relief but also for prevention and long-term functional recovery.</p>