Early studies on the physiological effects of melatonin typically reported hypnotic 'side-effects'. Later studies, specifically addressing this action, failed to reliably replicate hypnotic effects using standard polysomnography. This difference may be related to differences in the basic physiological action of melatonin compared with more conventional hypnotics. It is suggested that melatonin exerts a hypnotic effect through thermoregulatory mechanisms. By lowering core body temperature, melatonin reduces arousal and increases sleep-propensity. Thus, in humans, one role of melatonin is to transduce the light-dark cycle and define a window-of-opportunity in which sleep-propensity is enhanced. As such, melatonin is likely to be an effective hypnotic agent for sleep disruption associated with elevated temperature due to low circulating melatonin levels. The combined circadian and hypnotic effects of melatonin suggest a synergistic action in the treatment of sleep disorders related to the inappropriate timing of sleep and wakefulness. Adjuvant melatonin may also improve sleep disruption caused by drugs known to alter normal melatonin production (e.g., beta-blockers and benzodiazepines). If melatonin is to be developed as a successful clinical treatment, differences between the pharmacological profile following exogenous administration and the normal endogenous rhythm should be minimized. Continued development as a useful clinical tool requires control of both the amplitude and duration of the exogenous melatonin pulse. There is a need to develop novel drug delivery systems that can reliably produce a square-wave pulse of melatonin at physiological levels for 8-10 hr duration.