Study Objective: The expression of the immediate early gene early growth response 3 (Egr3) is a functional marker of brain activity including responses to novelty, sustained wakefulness, and sleep. We examined the role of this gene in regulating wakefulness and sleep. Methods: Electroencephalogram/electromyogram (EEG/EMG) were recorded in Egr3-/-and wild-type (WT) mice during 24 h baseline, 6 h sleep disruption and 6 h recovery. Serotonergic signaling was assessed with 6 h EEG/EMG recordings after injections of nonselective 5-HT2 antagonist (clozapine), selective 5-HT2 antagonists (5-HT2A; MDL100907 and 5-HT2BC; SB206553) and a cocktail of both selective antagonists, administered in a randomized order to each animal. Results: Egr3-/-mice did not exhibit abnormalities in the timing of wakefulness and slow wave sleep (SWS); however, EEG dynamics in SWS (suppressed 1-3 Hz power) and in quiet wakefulness (elevated 3-8 Hz and 15-35 Hz power) differed in comparison to WT-mice. Egr3-/-mice showed an exaggerated response to sleep disruption as measured by active wakefulness, but with a blunted increase in homeostatic sleep drive (elevated 1-4 Hz power) relative to WT-mice. Egr3-/-mice exhibit greatly reduced sedative effects of clozapine at the electroencephalographic level. In addition, clozapine induced a previously undescribed dissociated state (low amplitude, low frequency EEG and a stable, low muscle tone) lasting up to 2 h in WT-mice. Egr3-/-mice did not exhibit this phenomenon. Selective 5-HT2A antagonist, alone or in combination with selective 5-HT2BC antagonist, caused EEG slowing coincident with behavioral quiescence in WT-mice but not in Egr3-/-mice. Conclusion: Egr3 has an essential role in regulating cortical arousal, wakefulness, and sleep, presumably by its regulation of 5-HT2 receptors.