The main pharmacological effects of sedative agents are sedation, hypnosis, antianxiety, and antidepression. Traditional Chinese medicine (TCM) has a long history of clinical experience in treating insomnia. This review focuses mainly on the role of active ingredients from TCM in the treatment of insomnia. Single herbs and their active ingredients from TCM with hypnotic effects are summarized through reviewing the relevant literature published in the past 20 y. The active ingredients are divided into alkaloids, terpenoids, and volatile oils, flavonoids, lignanoids and coumarins, saponins, and others. Current studies on TCM in treating insomnia are described from the aspects of active ingredients, sources, experimental models and methods, results, and mechanisms. In addition, Chinese compound prescriptions developed from a variety of single herbs with sedative–hypnotic effects are introduced. The acting pathways of TCM are covered from the perspectives of regulating central neurotransmitters, influencing sleep-related cytokines, and improving the structure of the central nervous system.