Sleep reactivity is the trait-like degree to which stress exposure disrupts sleep, resulting in difficulty falling and staying asleep. Individuals with highly reactive sleep systems experience drastic deterioration of sleep when stressed, whereas those with low sleep reactivity proceed largely unperturbed during stress. Research shows that genetics, familial history of insomnia, female gender and environmental stress influence how the sleep system responds to stress. Further work has identified neurobiological underpinnings for sleep reactivity involving disrupted cortical networks and dysregulation in the autonomic nervous system and hypothalamic-pituitary-adrenal axis. Sleep reactivity is most pathologically and clinically pertinent when in excess, such that high sleep reactivity predicts risk for future insomnia disorder, with early evidence suggesting high sleep reactivity corresponds to severe insomnia phenotypes (sleep onset insomnia and short sleep insomnia). High sleep reactivity is also linked to risk of shift-work disorder, depression and anxiety. Importantly, stress-related worry and rumination may exploit sensitive sleep systems, thereby augmenting the pathogenicity of sleep reactivity. With the development of cost-effective assessment of sleep reactivity, we can now identify individuals at risk of future insomnia, shift-work disorder and mental illness, thus identifying a target population for preventive intervention. Given that insomniacs with high sleep reactivity tend to present with severe insomnia phenotypes, patient sleep reactivity may inform triaging to different levels of treatment. Future research on sleep reactivity is needed to clarify its neurobiology, characterize its long-term prospective associations with insomnia and shift-work disorder phenotypes, and establish its prognostic value for mental illness and other non-sleep disorders.