While insomnia is the second most common mental disorder, progress in our understanding of underlying neurobiological mechanisms has been limited. The present review addresses the definition and prevalence of insomnia and explores its subjective and objective characteristics across the 24-hour day. Subsequently, the review extensively addresses how the vulnerability to develop insomnia is affected by genetic variants, early life stress, major life events, and brain structure and function. Further supported by the clear mental health risks conveyed by insomnia, the integrated findings suggest that the vulnerability to develop insomnia could rather be found in brain circuits regulating emotion and arousal than in circuits involved in circadian and homeostatic sleep regulation. Finally, a testable model is presented. The model proposes that in people with a vulnerability to develop insomnia, the locus coeruleus is more sensitive to—or receives more input from—the salience network and related circuits, even during rapid eye movement sleep, when it should normally be sound asleep. This vulnerability may ignite a downward spiral of insufficient overnight adaptation to distress, resulting in accumulating hyperarousal, which, in turn, impedes restful sleep and moreover increases the risk of other mental health adversity. Sensitized brain circuits are likely to be subjectively experienced as “sleeping with one eye open”. The proposed model opens up the possibility for novel intervention studies and animal studies, thus accelerating the ignition of a neuroscience of insomnia, which is direly needed for better treatment.