Most sedative‐hypnotics used in insomnia treatment target the γ‐aminobutyric acid (GABA)_A receptors. A vast repertoire of GABA_A receptor subtypes has been identified and displays specific electrophysiological and functional properties. GABA_A‐mediated inhibition traditionally refers to ‘phasic’ inhibition, arising from synaptic GABA_A receptors which transiently inhibit neurons. However, there is growing evidence that peri‐ or extra‐synaptic GABA_A receptors are continuously activated by low GABA concentrations and mediate a ‘tonic’ conductance. This slower type of signaling appears to play a key role in controlling cell excitability. This review aims at summarizing recent knowledge on GABA transmission, including the emergence of tonic conductance, and highlighting the importance of GABA_A receptor heterogeneity. The mechanism of action of sedative‐hypnotic drugs and their effects on sleep and the electroencephalogram will be reported. Furthermore, studies using genetically engineered mice will be emphasized, providing insights into the role of GABA_A receptors in mechanisms underlying physiological and pharmacological sleep. Finally, we will address the potential of GABA_A receptor pharmacology for the treatment of insomnia.