Abstract Study Objectives The regulation of sleep-wake cycles is crucial for the brain’s health and cognitive skills. Among the various substances known to control behavioral states, intraventricular injection of neuropeptide S (NPS) has already been shown to promote wakefulness. However, the NPS signaling pathway remains elusive. In this study, we characterized the effects of NPS in the ventrolateral preoptic nucleus (VLPO) of the hypothalamus, one of the major brain structures regulating non-rapid eye movement (NREM) sleep. Methods We combined polysomnographic recordings, vascular reactivity, and patch-clamp recordings in mice VLPO to determine the NPS mode of action. Results We demonstrated that a local infusion of NPS bilaterally into the anterior hypothalamus (which includes the VLPO) significantly increases awakening and specifically decreases NREM sleep. Furthermore, we established that NPS application on acute brain slices induces strong and reversible tetrodotoxin (TTX)-sensitive constriction of blood vessels in the VLPO. This effect strongly suggests that the local neuronal network is downregulated in the presence of NPS. At the cellular level, we revealed by electrophysiological recordings and in situ hybridization that NPSR mRNAs are only expressed by non-Gal local GABAergic neurons, which are depolarized by the application of NPS. Simultaneously, we showed that NPS hyperpolarizes sleep-promoting neurons, which is associated with an increased frequency in their spontaneous IPSC inputs. Conclusion Altogether, our data reveal that NPS controls local neuronal activity in the VLPO. Following the depolarization of local GABAergic neurons, NPS indirectly provokes feed-forward inhibition onto sleep-promoting neurons, which translates into a decrease in NREM sleep to favor arousal.