Sleep and emotions are closely associated; however, the methodological challenges in the examination of sleep and the processes of emotion regulation in children and adolescents have not been investigated so far. Additionally, there is the demand to identify the levels of emotion regulating processes in which problematic or restricted sleep causes effect. Experimental sleep deprivation as well as prevalent sleep problems have been found to have negative influence on mental health and regulating functions. This review focuses first on the methodological protocols of the included studies. Subsequently, the results are summarized in the context of a multilevel model of emotion regulation. Thereafter, suggestions for future directions are given. Sleep problems and sleep deprivation are associated with a decrease of functional emotion regulating behavior and impaired emotion generation, and prolonged sleep enhances better mood and affect states, positive emotion expression, and faster sensory processing in response to emotional stimuli. This literature review highlights the limitations in current research, focusing on types of measurements, task characteristics, and data analysis. At the conclusion, suggestions are given for the future research direction in the field of sleep and emotion regulation in children and adolescents.