The ventral pallidum (VP) regulates motivation, drug addiction, and several behaviors that rely on heightened arousal. However, the role and underlying neural circuits of the VP in the control of wakefulness remain poorly understood. In the present study, we sought to elucidate the specific role of VP GABAergic neurons in controlling sleep–wake behaviors in mice. Fiber photometry revealed that the population activity of VP GABAergic neurons was increased during physiological transitions from non-rapid eye movement (non-REM, NREM) sleep to either wakefulness or REM sleep. Moreover, chemogenetic and optogenetic manipulations were leveraged to investigate a potential causal role of VP GABAergic neurons in initiating and/or maintaining arousal. In vivo optogenetic stimulation of VP GABAergic neurons innervating the ventral tegmental area (VTA) strongly promoted arousal via disinhibition of VTA dopaminergic neurons. Functional in vitro mapping revealed that VP GABAergic neurons, in principle, inhibited VTA GABAergic neurons but also inhibited VTA dopaminergic neurons. In addition, optogenetic stimulation of terminals of VP GABAergic neurons revealed that they promoted arousal by innervating the lateral hypothalamus, but not the mediodorsal thalamus or lateral habenula. The increased wakefulness chemogenetically evoked by VP GABAergic neuronal activation was completely abolished by pretreatment with dopaminergic D1 and D2/D3 receptor antagonists. Furthermore, activation of VP GABAergic neurons increased exploration time in both the open-field and light–dark box tests but did not modulate depression-like behaviors or food intake. Finally, chemogenetic inhibition of VP GABAergic neurons decreased arousal. Taken together, our findings indicate that VP GABAergic neurons are essential for arousal related to motivation.