This investigation centered on the hypnagogic and hypnopompic wake-sleep/sleep-wake transition states and the associated exploration of hypnagogic and hypnopompic experiences (HHEs), and sleep paralysis (SP) on psychiatric exacerbation and paradoxical masking. The study aims to discern causality by examining how these sleep-related experiences may contribute to the emergence or exacerbation of psychiatric and neurodegenerative conditions, particularly, pertaining to the clinical or sub-clinical demographic of Schizotypal Personality Disorder (STPD), Mood Disorders, Schizophrenia, Post-Traumatic Stress Disorder (PTSD), Generalized Anxiety Disorder (GAD), Narcolepsy, Panic Disorder, specific phobias, or heightened psychotic sensitivity. Methodologically, this study employed a comprehensive literature review, drawing from a range of studies across sleep medicine, psychiatry, and psychology, utilizing PubMed-indexed peer-reviewed scientific literature, sourcing from academic institutions, Google Scholar, and open-access publications. This interdisciplinary approach allowed for a nuanced and systematic understanding of the potential links between specific sleep-wake/wake-sleep aberrations and their masking or exacerbation of clinical/sub-clinical psychiatric symptomatology in this particular demographic. Insights gained from the outcome of this study hold promise for advancing understanding of the interrelationship between sleep neurobiology and psychiatric disorders. Additionally, the findings may inform targeted therapeutic interventions tailored to mitigate the impact of sleep-wake disruptions on vulnerable populations. The overarching objective is to bridge current gaps in knowledge, cultivating a more profound understanding with direct implications for both clinical practice and ongoing research endeavors. The study outcomes provide an intriguing understanding of the complex relationship between sleep neurobiology and psychiatric disorders, paving the way for targeted therapeutic interventions to alleviate the effects of sleep-wake disruptions, and addressing critical gaps in knowledge with direct implications for clinical practice and ongoing research.