This study examined the role of sleep problems in the decisions of families to institutionalize elderly relatives. Previous work on institutionalization of the elderly has given little attention to the contribution of nocturnal, sleep-related problems. Seventy-three primary caregivers of elders recently admitted to a nursing home or psychiatric hospital were asked to identify the problems the elder was having during the night and day and rate the degree to which these influenced their decision to institutionalize the elder. Seventy percent of the caregivers in each sample cited nocturnal problems in their decision to institutionalize, often because their own sleep was disrupted. The most frequent disruptive nocturnal events were micturition, pain, and complaints of sleeplessness. Sleep problems of the elderly contribute heavily to the decision to institutionalize an elder and thus to the social and economic cost of institutional care. They appear to do this largely by interfering with the sleep of caregivers. The nature, prevalence, and treatability of the sleeping problems of both elders and their caregivers need further study. (J Geriatr Psychiatry Neurol 1991;4:204-210).