Objectives The aim of this preliminary study was to evaluate if Sleep Restriction Therapy for insomnia is associated with modifications to physiological arousal, indexed through overnight measures of plasma cortisol concentrations and core body temperature. Methods In a pre-to-post open label study design, eleven patients with chronic and severe Psychophysiological Insomnia underwent 5 weeks of Sleep Restriction Therapy. Results Eight (73%) patients out of 11 consented completed therapy and showed a decrease in insomnia severity pre-to-post treatment (mean (SD): 18.1 (2.8) versus 8.4 (4.8); p = .001). Six patients were analyzed with pre-to-post overnight measures of temperature and cortisol. Contrary to our hypothesis, significantly higher levels of plasma cortisol concentrations were found during the early morning at post-treatment compared to baseline (p.01), while no change was observed in the pre-sleep phase or early part of the night. Core body temperature during sleep was however reduced significantly (overall mean [95% CI]: 36.54 (°C) [36.3, 36.8] versus 36.45 [36.2, 36.7]; p.05). Conclusions Sleep Restriction Therapy therefore was associated with increased early morning cortisol concentrations and decreased core body temperature, supporting the premise of physiological changes in functioning after effective therapy. Future work should evaluate change in physiological variables associated with clinical treatment response.