To investigate the impact of disorders of arousal and sleep disturbance on everyday living and participation in rehabilitation. Survey of rehabilitation centres based on naturalistic observation. One hundred and thirty-five adults with acquired brain injury were reported by rehabilitation staff in seven centres across the UK for presence of arousal and/or sleep disturbance, the impact on rehabilitation and daily living and treatment strategies in use. Disturbance of arousal or sleep patterns was reported in 47% of the sample, with significant adverse effect on activity evident in two-thirds of such cases. Prevalence of disordered arousal was consistent over time for up to 10 years post-injury. Concurrent psychiatric illness, but not epilepsy, was associated with arousal and sleep disorder. Non-pharmacological interventions and benzodiazepine/hypnotic drugs were in use in 34% and 20% of cases respectively. In all cases of prescribed hypnotic drugs, period of use exceeded recommended UK guidelines. Long-term outcome from severe brain injury can be compromised by enduring disturbance of arousal, most commonly evidenced as sleep disorder. Treatment should be based on judicious use of medication (beyond hypnotic drugs) and greater emphasis on non-pharmacological management.