Studies suggest associations between cortisol and sleep, and cortisol shows a profound diurnal rhythm. The evidence about the relationship between chronic insomnia and cortisol is mixed. Chronic insomnia is associated with the risk of mental health disorders. The aim of this study was to evaluate the association of insomnia severity and objective sleep pattern with morning cortisol level and psychological health. The instruments used were the Insomnia Severity Index (ISI), polysomnography, Beck Depression Inventory (BDI), and Profile of Mood States (POMS). Serum cortisol was analyzed by chemiluminescence. The data revealed significant positive correlations of ISI with morning cortisol level (r = 0.37, p = 0.03), BDI score (r = 0.44, p < 0.01), and POMS-tension anxiety (r = 0.39, p = 0.02). Sleep stages N2 and N3 were correlated with POMS-fatigue (r = 0.46, p < 0.01; r = -0.37, p = 0.04). Sleep stage N3 was also negatively correlated with POMS-tension-anxiety (r = -0.36, p = 0.04). Higher insomnia severity was associated with higher morning cortisol, depression, and tension-anxiety. Sleep stage N2 was associated with higher fatigue and N3 was associated with lower tension-anxiety and fatigue.