Until recently, the association of chronic insomnia with significant medical morbidity was not established and its diagnosis was based solely on subjective complaints. We present evidence that insomnia with objective short sleep duration is the most biologically severe phenotype of the disorder, as it is associated with cognitive-emotional and cortical arousal, activation of both limbs of the stress system, and a higher risk for hypertension, impaired heart rate variability, diabetes, neurocognitive impairment, and mortality. Also, it appears that objective short sleep duration is a biological marker of genetic predisposition to chronic insomnia. In contrast, insomnia with objective normal sleep duration is associated with cognitive-emotional and cortical arousal and sleep misperception but not with signs of activation of both limbs of the stress system or medical complications. Furthermore, the first phenotype is associated with unremitting course, whereas the latter is more likely to remit. We propose that short sleep duration in insomnia is a reliable marker of the biological severity and medical impact of the disorder. Objective measures of sleep obtained in the home environment of the patient would become part of the routine assessment of insomnia patients in a clinician’s office setting. We speculate that insomnia with objective short sleep duration has primarily biological roots and may respond better to biological treatments, whereas insomnia with objective normal sleep duration has primarily psychological roots and may respond better to psychological interventions alone.