Abstract Purpose of Review Previous research has struggled with identifying clear-cut, objective counterparts to subjective distress in insomnia. Approaching this discrepancy with a focus on hyperarousal and dysfunctional affective processes, studies examining brain structures and neural networks involved in affect and arousal are reviewed and conclusions for an updated understanding of insomnia are drawn. Recent Findings Recent studies found that amygdala reactivity, morphometry and adaptation in insomnia are altered, indicating that processing of negative stimuli is intensified and more lasting. Also, patients with insomnia show aberrant connectivity in the default mode network (DMN) and the salience network (SN), which is associated with subjective sleep disturbances, hyperarousal, maladaptive emotion regulation and disturbed integration of emotional states. The limbic circuit is assumed to play a crucial role in enhanced recall of negative experiences. Summary There is reason to consider insomnia as a disorder of affect and arousal. Dysregulation of the limbic circuit might perpetuate impaired connectivity in the DMN and the SN. However, the interplay between the networks is yet to be researched.