To estimate the prevalence of, and to identify correlates of clinically significant sleep problems in adult Israeli citizens exposed to chronic terrorism and war trauma or threat thereof. A population-based, cross-sectional study of 1001 adult Israeli citizens interviewed by phone between July 15 and August 26, 2008. The phone survey was conducted in Hebrew and assessed demographics, trauma/stressor exposure, probable posttraumatic stress disorder (PTSD), probable depression, and sleep problems. Probable PTSD and depression were assessed with the PTSD Symptom Scale (PSS) and Patient Health Questionnaire (PHQ-9), respectively, following DSM-IV diagnostic criteria. Sleep problems in the past month were assessed with the Pittsburgh Sleep Quality Index (PSQI), on which a global composite score ≥ 6 indicates a clinical-level sleep problem. Prevalence of probable PTSD and depression was 5.5% and 5.8%, respectively. Prevalence of clinically significant sleep problems was 37.4% overall, but was significantly higher for probable PTSD (81.8%) and probable depression (79.3%) subgroups. Independent correlates of poor sleep included being female, older, less educated, experiencing major life stressors, and experiencing psychosocial resource loss. Psychosocial resource loss due to terrorist attacks emerged as the strongest potentially modifiable risk factor for sleep problems. Sleep problems are common among Israeli adults living under chronic traumatic threat and trauma exposure. Given the continuing threat of war, interventions that bolster psychosocial resources may play an important role in preventing or alleviating sleep problems in this population.