Background: In this paper, we aimed to examine the patterns of sleep disturbance in adjustment disorder (AD) and depressive episode (DE), to examine the variables associated with sleep disturbance in AD and DE and associated impairment in functioning. Methods: This is a multi-centre case-control study of 370 patients: 185 patients with AD and 185 patients with a diagnosis of DE, recruited from the liaison psychiatry services of three Dublin hospitals. We examined the participants’ sleep pathology using the sleep disturbance items on the Schedule for Clinical Assessment in Neuropsychiatry, and the Inventory of Depressive Symptoms—Clinician-rated-30. Results: Patients with a diagnosis of AD were less likely to report disturbed sleep than those with a diagnosis of DE (p = 0.002). On multivariate analysis, sleep disturbance was significantly associated with greater severity of certain depressive symptoms: decreased appetite (p < 0.001) and psychomotor agitation (p = 0.009). Decreased appetite, younger age and single marital status were significantly associated with sleep disturbance in male patients, and decreased appetite and psychomotor agitation were significantly associated with sleep disturbance in female participants. Conclusions: This is the largest study to date which has examined sleep disturbance in adjustment disorder. Disturbance of sleep is a significant symptom in AD and may represent a potential target for treatment. With further research, patterns of sleep disturbance may be useful in differentiating AD from DE.