The perifornical–lateral hypothalamic area (PF-LHA) plays a central role in the regulation of behavioral arousal. The PF-LHA contains several neuronal types including wake-active hypocretin (HCRT) neurons that have been implicated in the promotion and/or maintenance of behavioral arousal. Adenosine is an endogenous sleep factor and recent evidence suggests that activation and blockade of adenosine A 1 receptors within the PF-LHA promote and suppress sleep, respectively. Although, an in vitro study indicates that adenosine inhibits HCRT neurons via A 1 receptor, the in vivo effects of A 1 receptor mediated adenosinergic transmission on PF-LHA neurons including HCRT neurons are not known. First, we determined the effects of N 6-cyclopentyladenosine (CPA), an adenosine A 1 receptor agonist, on the sleep–wake discharge activity of the PF-LHA neurons recorded via microwires placed adjacent to the microdialysis probe used for its delivery. Second, we determined the effects of CPA and that of an A 1 receptor antagonist, 1,3-dipropyl-8-phenylxanthine (CPDX) into the PF-LHA on cFos-protein immunoreactivity (Fos-IR) in HCRT and non-HCRT neurons around the microdialysis probe used for their delivery. The effect of CPA on Fos-IR was studied in rats that were kept awake during lights-off phase, whereas the effect of CPDX was examined in undisturbed rats during lights-on phase. CPA significantly suppressed the sleep–wake discharge activity of PF-LHA neurons. Doses of CPA (50 μM) and CPDX (50 μM) that suppressed and induced arousal, respectively, in our earlier study [Alam MN, Kumar S, Rai S, Methippara M, Szymusiak R, McGinty D (2009) Brain Res 1304:96–104], significantly suppressed and increased Fos-IR in HCRT and non-HCRT neurons. These findings suggest that wake-promoting PF-LHA system is subject to increased endogenous adenosinergic inhibition and that adenosine acting via A 1 receptors, in part, inhibits HCRT neurons to promote sleep.