The paucity of clinical and preclinical studies investigating sex differences in sleep has resulted in mixed findings as to the exact nature of these differences. Although gonadal steroids are known to modulate sleep in females, less is known about males. Moreover, little evidence exists concerning the origin of these sex differences in sleep behavior. Thus, the goal of this study was to directly compare the sensitivity of sleep behavior in male and female Sprague Dawley rats to changes in the gonadal steroid milieu and to test whether the sex differences in sleep are the result of brain sexual differentiation or differences in circulating gonadal steroids. Here we report the magnitude of change in sleep behavior induced by either estradiol (E2) or testosterone (T) was greater in females compared with males, suggesting that sleep behavior in females is more sensitive to the suppressive effects of gonadal steroids. Furthermore, we demonstrated that the organizational effects of early gonadal steroid exposure result in male-like responsivity to gonadal steroids and directly alter the activity of the ventrolateral preoptic area (VLPO), an established sleep-promoting nucleus, in adult masculinized females. Moreover, the nonaromatizable androgen dihydrotestosterone did not suppress sleep in either males or females, suggesting that the T-mediated effect in females was due to the aromatization of T into E2. Together our data suggest that, like sex behavior, sex differences in sleep follow the classical organizational/activational effects of gonadal steroids.