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Schizophrenia has long been associated with abnormalities in circadian rhythms and sleep. Up until now, there have been no thorough reviews of the potential mechanisms behind the myriad of circadian and sleep abnormalities observed in schizophrenia and psychosis. We present evidence of sleep playing an important role in psychosis predominantly mediated by dopaminergic pathways. A synthesis of both human and animal experimental work suggests that the interplay between sleep and dopamine is important in the generation and maintenance of psychosis. In particular, both animal and human data point to sleep disruption increasing dopamine release and sensitivity. Furthermore, elevated dopamine levels disrupt sleep and circadian rhythms. The synthesis of knowledge suggests that circadian rhythms, dopamine dysregulation, and psychosis are intricately linked. This suggests that treatment of circadian disturbance may be a useful target in improving the lives and symptoms of patients with schizophrenia.