Insomnia is prevalent, causing severe distress and impairment. This review focuses on illuminating the puzzling finding that many insomnia patients misperceive their sleep. They overestimate their sleep onset latency (SOL) and underestimate their total sleep time (TST), relative to objective measures. This tendency is ubiquitous (although not universal). Resolving this puzzle has clinical, theoretical, and public health importance. There are implications for assessment, definition, and treatment. Moreover, solving the puzzle creates an opportunity for real-world applications of theories from clinical, perceptual, and social psychology as well as neuroscience. Herein we evaluate 13 possible resolutions to the puzzle. Specifically, we consider the possible contribution, to misperception, of (1) features inherent to the context of sleep (e.g., darkness); (2) the definition of sleep onset, which may lack sensitivity for insomnia patients; (3) insomnia being an exaggerated sleep complaint; (4) psychological distress causing magnification; (5) a deficit in time estimation ability; (6) sleep being misperceived as wake; (7) worry and selective attention toward sleep-related threats; (8) a memory bias influenced by current symptoms and emotions, a confirmation bias/belief bias, or a recall bias linked to the intensity/recency of symptoms; (9) heightened physiological arousal; (10) elevated cortical arousal; (11) the presence of brief awakenings; (12) a fault in neuronal circuitry; and (13) there being 2 insomnia subtypes (one with and one without misperception). The best supported resolutions were misperception of sleep as wake, worry, and brief awakenings. A deficit in time estimation ability was not supported. We conclude by proposing several integrative solutions. (Contains 1 footnote, 4 tables, and 1 figure.)