This article deals with the effects of alcohol on sleep and sleep EEG of healthy individuals and alcohol-dependent patients during different phases of alcohol dependency. Healthy individuals initially experience an improvement in sleep, although a greater quantity of alcohol can lead to problems of sleep maintenance during the second half of the night. Pre-existing sleep deprivation or sleep restriction potentiates the effects of alcohol. Alcohol-dependent patients are found to be more prone to sleep problems than healthy individuals, which can facilitate the development of alcoholism. These patients experience difficulty falling asleep and suffer from a reduced total sleep time during all phases of the disorder, often accompanied by other sleep disorders such as sleep apnea syndrome or periodic leg movements during sleep. Certain predictors for the risk of relapse in abstinent alcoholics have been identified. Neurobiological findings in sleep and alcohol dependency are discussed. The cholinergic-aminergic reciprocal interaction model of REM and non-REM sleep regulation is significant in this context. Therapeutic implications are discussed.