Sleep and wakefulness control in the mammalian brain requires the coordination of various discrete interconnected neurons. According to the most conventional sleep model, wake-promoting neurons (WPNs) and sleep-promoting neurons (SPNs) compete for network dominance, creating a systematic "switch" that results in either the sleep or awake state. WPNs and SPNs are ubiquitous in the brainstem and diencephalon, areas that together contain <1% of the neurons in the human brain. Interestingly, many of these WPNs and SPNs co-express and co-release various types of the neurotransmitters that often have opposing modulatory effects on the network. Co-transmission is often beneficial to structures with limited numbers of neurons because it provides increasing computational capability and flexibility. Moreover, co-transmission allows subcortical structures to bi-directionally control postsynaptic neurons, thus helping to orchestrate several complex physiological functions such as sleep. Here, we present an in-depth review of co-transmission in hypothalamic WPNs and SPNs and discuss its functional significance in the sleep-wake network.