Melatonin is a hormone secreted by the pineal gland. It displays a very marked nycthohemeral rhythm, which is entrained to the light dark cycle. The secretion spreads over 8–10 hours, with a maximum around 3–4 a.m. Melatonin plays the role of an endogenous synchronizer which regulates circadian rhythms, especially the sleep/wake and temperature rhythms. Acute melatonin administration reduces sleep latency, increases theta/alpha power and spindle activity (soporific activity). Fast-release melatonin preparations showed inconstant effects in insomnia. Melatonin displays a short blood half-life, a fast turn over and undergoes a high first-pass hepatic metabolism. More than 80% is excreted exclusively in the urine as 6-sulfatoxymelatonin. The individual's capacity to produce the endogenous hormone, the decline in circadian clock output and the increase in complaints of poor sleep quality at older age led to develop a prolonged-release melatonin preparation to mimic the endogenous secretion in patients. This reviews provides data on physiological and pharmacological melatonin effects related to sleep and summarizes trials published about Circadin® efficacy and tolerance in insomnia. Preliminary therapeutic data on other indications are given. The main clinically relevant benefits are improvements in sleep quality and latency, next-day morning alertness and quality of life. The response develops over several days. An oral 2-mg dose once daily, for 3 months, is generally well tolerated with no rebound, withdrawal or ‘hangover’ effects and no safety concerns on concomitant therapy with antihypertensive, antidiabetic, lipid-lowering or anti-inflammatory drugs. Untoward effects of hypnotics on cognition, memory, postural stability and sleep structure are not seen with Circadin®. Given as a first-line prescription, with 13 weeks’ posology and the lack of rebound effects, Circadin® has the potential to improve quality of life in insomnia patients aged 55 years and older and avoid long-term use of hypnotics.