Sleep disruption is a frequent problem of advancing age, often accompanied by low-grade chronic central and peripheral inflammation. We examined whether chronic neuroinflammation in the preoptic and basal forebrain area (POA-BF), a critical sleep-wake regulatory structure, contributes to this disruption. We developed a targeted viral vector designed to overexpress tumor necrosis factor-alpha (TNFα), specifically in astrocytes (AAV5-GFAP-TNFα-mCherry), and injected it into the POA of young mice to induce heightened neuroinflammation within the POA-BF. Compared to the control (treated with AAV5-GFAP-mCherry), mice with astrocytic TNFα overproduction within the POA-BF exhibited signs of increased microglia activation, indicating a heightened local inflammatory milieu. These mice also exhibited aging-like changes in sleep-wake organization and physical performance, including (a) impaired sleep-wake functions characterized by disruptions in sleep and waking during light and dark phases, respectively, and a reduced ability to compensate for sleep loss; (b) dysfunctional VLPO sleep-active neurons, indicated by fewer neurons expressing c-fos after suvorexant-induced sleep; and (c) compromised physical performance as demonstrated by a decline in grip strength. These findings suggest that inflammation-induced dysfunction of sleep- and wake-regulatory mechanisms within the POA-BF may be a critical component of sleep-wake disturbances in aging.