Melatonin, a hormone produced by the pineal gland at night, influences circadian rhythms, most notably the sleep–wake cycle. Much scientific evidence indicates that melatonin has sleep-enhancing properties. Sleep after melatonin administration is more similar to that recorded during normally occurring sleep than after administration of currently available hypnotic agents. Impairment in melatonin production may contribute to the well-known increased incidence of insomnia in the aged. In addition, some medications may impair sleep by inhibiting or distorting the melatonin rhythm. Insomnia associated with diminished nocturnal melatonin secretion may benefit from melatonin replacement therapy. Melatonin is rapidly eliminated from the body. Hence, to maintain effective serum concentrations of melatonin throughout the night, a prolonged-release (PR) formulation of melatonin (Circadin™) has been developed which provides a melatonin profile that simulates the normal nocturnal increase in melatonin concentrations. The sleep-inducing effects of PR-melatonin, at a dosage strength of 2 mg, have been demonstrated in exploratory studies in elderly insomnia patients and patients with depression or schizophrenia and sleep complaints. In the USA melatonin is available without any medical indication as a nutritional supplement. Animal toxicological studies and clinical experience has not revealed any consistent pattern of adverse events or laboratory test value alterations associated with the administration of the PR-melatonin. Clinical trials in a large population of elderly insomniacs have been set up to provide the regulatory bodies with the required evidence on the safety and efficacy of PR-melatonin. Drug Dev. Res. 50:226–234, 2000. © 2000 Wiley-Liss, Inc.