Optical sensors, particularly fiber Bragg grating (FBG) sensors have achieved a fast ingress into the fields of medical diagnostic and vital signs monitoring. Wearable smart textiles equipped with FBG sensors are catching huge research attention in different applications for measurement and monitoring of physiological parameters. In this paper, we report a simple technique for remote monitoring of sleep disorder using a smart vest implemented with four FBG stress sensors located at different sides of the vest and free space optics (FSO) transmission system. The sleep disorder of the patient is monitored in real time through shifts in the original Bragg wavelengths of sensors by stress loading during random changes in patient’s sleeping postures. The reflected wavelength from a stress loaded sensor at a certain posture is transmitted over 0.5 km long FSO channel towards remote medical center, photodetected, and then can be processed in a PC to record the restlessness in a certain time interval in terms of total number of times sleeping postures are changed, total time spent at a certain posture etc. To correctly detect the stress loaded FBG sensor at the medical center, various parameters of FBG sensors and demultiplexer are carefully adjusted to minimize the power leakages from unloaded sensors that may result into errors in the detection. Maximum dynamic range around 45 dB has been achieved ensuring accurate detection. This study not only provides a cost-efficient and non-intrusive solution for monitoring the sleep disorder of patients but also can be used for real-time monitoring of various other ailments, such as lung, brain, and cardiac diseases in future.