Polyphenols have been well-established to exert sedative-hypnotic effects in psychopharmacology. Lime (Citrus aurantifolia) peel is rich in biologically active polyphenols; however, the effects of lime peel extract on sleep have not yet been demonstrated. A comparison was conducted in mice, between the sleep-promoting effects of a standardized lime peel supplement (SLPS) and a well-known hypnotic drug, zolpidem, and its hypnotic mechanism was investigated using in vivo and in vitro assays. The effects of SLPS on sleep were assessed using a pentobarbital-induced sleep test and sleep architecture analysis based on recording electroencephalograms and electromyograms. Additionally, a GABAA receptor binding assay, electrophysiological measurements, and in vivo animal models were used to elucidate the hypnotic mechanism. SLPS (200 and 400 mg/kg) was found to significantly decrease sleep latency and increase the amount of non-rapid eye movement sleep without altering delta activity. The hypnotic effects of SLPS were attributed to its flavonoid-rich ethyl acetate fraction. SLPS had a binding affinity to the GABA-binding site of the GABAA receptor and directly activated the GABAA receptors. The hypnotic effects and GABAA receptor activity of SLPS were completely blocked by bicuculline, a competitive antagonist of the GABAA receptor, in both in vitro and in vivo assays. To the best of our knowledge, this study is the first to demonstrate the hypnotic effects of SLPS, which acts via the GABA-binding site of the GABAA receptor. Our results suggest that lime peel, a by-product abundantly generated during juice processing, can potentially be used as a novel sedative-hypnotic.