Recent studies have led to the discovery of a neuropeptide system that regulates arousal states. The hypocretins (hcrt1 and hcrt2, also called the orexins) are neuropeptides of related sequence derived from the same precursor whose expression is restricted to a few thousand neurons of the lateral hypothalamus. Two G-protein-coupled receptors for the hypocretins have been identified, and these have different distributions within the central nervous system and differential affinities for the two hypocretins. Hypocretin fibers project throughout the brain, including several areas implicated in cardiovascular function and regulation of the sleep-wake cycle. Central administration of synthetic hypocretin-1 affects blood pressure, hormone secretion and locomotor activity, and increases wakefulness while suppressing rapid eye movement sleep. Most human patients with narcolepsy have greatly reduced levels of hypocretin peptides in their cerebral spinal fluid and no or barely detectable hypocretin neurons in their hypothalami, suggestive of autoimmune attack. Development of nonpeptidergic hypocretin antagonists may prove useful in sleep disorders, whereas hypocretin agonists may be used to treat narcolepsy and excessive daytime sleepiness. The hypocretins are also an excellent target for the pharmacological treatment of the deregulated arousal state that characterizes depression or addictive behavior.