Objective: The main clinical characteristics that diversify paradoxical insomniacs from objective insomnia patients remain unclear. The current study systematically examined the difference in sleep-related, subjective-and objective parameters between insomnia patients with or without misperception. Methods: Patients who reported having poor sleep quality (subjective sleep efficiency; SE ≤ 85%) on both weekends and weekdays and difficulty falling asleep in the Sleep Heart Health Study were examined in this study. Patients with objective SE ≤ 85% and > 85% were then classified as objective insomnia (n = 58) and paradoxical insomnia (n = 61), respectively. The differences in demographic data, subjective sleep quality, daytime function, and objective sleep architecture measured by polysomnography, were assessed between the groups. Results: Though there were no significant group differences in the demographics between objective insomniacs and paradoxical insomniacs, paradoxical insomniacs reported significantly poorer daytime function than patients with objective insomnia. Moreover, subjective sleep evaluation on recording day of paradoxical insomniacs was significantly higher than habitual reports. The main finding from this research was that the transition indices from stage N3 to stage N2 or N1 was significantly different between the two groups, which could indicate that sleep instability may be a factor in leading paradoxical insomnia patients to underestimate their sleep efficiency. Conclusions: Our findings indicated a possible link between sleep misperception and the microstructure of sleep, specifically the sleep-state instability. The interplay between the neurobiology of sleep instability and perception of sleep needs further investigation.