Impaired sleep is both a risk factor and a symptom of depression. Objective sleep is assessed using the sleep electroencephalogram (EEG). Characteristic sleep-EEG changes in patients with depression include disinhibition of rapid eye movement (REM) sleep, changes of sleep continuity, and impaired non-REM sleep. Most antidepressants suppress REM sleep both in healthy volunteers and depressed patients. Various sleep-EEG variables may be suitable as biomarkers for diagnosis, prognosis, and prediction of therapy response in depression. In family studies of depression, enhanced REM density, a measure for frequency of rapid eye movements, is characteristic for an endophenotype. Cordance is an EEG measure distinctly correlated with regional brain perfusion. Prefrontal theta cordance, derived from REM sleep, appears to be a biomarker of antidepressant treatment response. Some predictive sleep-EEG markers of depression appear to be related to hypothalamo-pituitary-adrenocortical system activity.