Sleep disturbance is increasingly recognized as an important, but understudied, mechanism in the complex and multi-factorial causation of the symptoms and functional disability associated with psychiatric disorders. This review proposes that it is biologically plausible for sleep disturbance to be mechanistically transdiagnostic. More specifically, we propose that sleep disturbance is aetiologically linked to various forms of psychopathology through: its reciprocal relationship with emotion regulation and its shared/interacting neurobiological substrates in (a) genetics — genes known to be important in the generation and regulation of circadian rhythms have been linked to a range of disorders and (b) dopaminergic and serotonergic function — we review evidence for the interplay between these systems and sleep/circadian biology. The clinical implications include potentially powerful and inexpensive interventions including interventions targeting light exposure, dark exposure, the regulation of social rhythms and the reduction of anxiety. We also consider the possibility of developing a ‘transdiagnostic’ treatment; one treatment that would reduce sleep disturbance across psychiatric disorders.