Recent evidence suggests that dopamine plays an important role in arousal, but the location of the dopaminergic neurons that may regulate arousal remains unclear. It is sometimes assumed that the dopaminergic neurons in the ventral tegmental area that project to the prefrontal cortex and striatum may regulate the state of arousal; however, the firing of these dopaminergic neurons does not correlate with overall levels of behavioral wakefulness. We identified wake-active dopaminergic neurons by combining immunohistochemical staining for Fos and tyrosine hydroxylase (TH) in awake and sleeping rats. Approximately 50% of the TH-immunoreactive (TH-ir) cells in the ventral periaqueductal gray matter (vPAG) expressed Fos protein during natural wakefulness or wakefulness induced by environmental stimulation, but none expressed Fos during sleep. Fos immunoreactivity was not seen in the substantia nigra TH-immunoreactive cells in either condition. Injections of 6-hydroxydopamine into the vPAG, which killed 55–65% of wake-active TH-ir cells but did not injure nearby serotoninergic cells, increased total daily sleep by ∼20%. By combining retrograde and anterograde tracing, we showed that these wake-active dopaminergic cells have extensive reciprocal connections with the sleep–wake regulatory system. The vPAG dopaminergic cells may provide the long-sought ascending dopaminergic waking influence. In addition, their close relationship with the dorsal raphe nucleus will require reassessment of previous studies of the role of the dorsal raphe nucleus in sleep, because many of those experiments may have been confounded by the then-unrecognized presence of intermingled wake-active dopaminergic neurons.