Acute illness and hospitalization are stressful events that may trigger sleep disturbances, which interfere with daily functioning. There is limited empirical evidence of patients' experience of sleep disturbances during the acute care episode. The purposes of this study were to 1) determine the number of patients who reported sleep disturbances throughout the acute care episode, and 2) examine the relationship between sleep disturbances and physical, psychological, and social functioning. A descriptive design with repeated measures was used. Patients admitted to medical and surgical in-hospital units were recruited. Data were collected within 24-48 hours of admission to the unit (T1), one week (T2), and 6-8 weeks (T3) following discharge. A total of 366 patients provided complete data across the three time points. Most patients (78%) were admitted to surgical units (cardiovascular, orthopedics); 82% were 50 years of age or older; 65% were men; and 72% were married. Sleep disturbances were assessed with one item numeric rating scale. Physical, psychological, and social functioning was measured with relevant subscale of the Medical Outcome Study SF 36. The percentage of patients who experienced sleep disturbances decreased slightly over time: 58% at T1, 55% at T2, and 45% at T3. On average, patients perceived sleep disturbances of moderate severity (mean: 3.0 at T1, 2.6 at T2, 2.5 at T3). At each time point, sleep disturbances were negatively associated with physical (-.10 to -.28), psychological (-.15 to -.28), and social (-.10 to -.37) functioning, and positively correlated with fatigue (.35 to .46). The findings imply that if not managed on a timely basis, sleep disturbances experienced during an acute illness episode may lead to chronic insomnia and interfere with daily functions and potentially adherence to treatment. Nurses are encouraged to assess this symptom and intervene accordingly (e.g., sleep hygiene and education) to prevent chronic insomnia.