Objective The objective of this study was to describe perceived and polysomnograhic (PSG) sleep patterns and determine whether stress exposure, psychological distress, and physiological stress activation differed among midlife women with psychophysiologic-type (PP-type) or subjective only-type (SO-type) insomnia or no insomnia. Methods Women had their sleep monitored, collected urine samples, and completed questionnaires in a week-long field study, and 53 women met criteria for insomnia types or no insomnia based on reported sleep quality and PSG sleep efficiency. Results As expected, women with PP-type insomnia were found to have the lowest sleep efficiency, took longer to fall asleep, had more wakefulness after sleep onset, and had more fragmented sleep. Perceptions of stress exposure, either for major or minor events, did not differ among groups. Despite there being no differences in perceived stress exposure, women with both types of insomnia scored higher on psychological distress (SCL-90R), especially on the somatization subscale, than women with no insomnia. Of the physiological stress activation indicators tested, a morning-to-evening difference in urinary cortisol statistically differed across the groups (p < .005). Women in the PP-type insomnia group had the highest levels of urinary cortisol in an early morning urine sample. Conclusions These data provide support for the hypothesis that, in midlife women, cognitive or emotional arousal with chronic stress neuroendocrine activation underlies chronic insomnia, particularly the PP-type.