As critical as waking brain function is to cognition, an extensive literature now indicates that sleep supports equally important, different yet complementary operations. This review will consider recent and emerging findings implicating sleep and specific sleep‐stage physiologies in the modulation, regulation, and even preparation of cognitive and emotional brain processes. First, evidence for the role of sleep in memory processing will be discussed, principally focusing on declarative memory. Second, at a neural level several mechanistic models of sleep‐dependent plasticity underlying these effects will be reviewed, with a synthesis of these features offered that may explain the ordered structure of sleep, and the orderly evolution of memory stages. Third, accumulating evidence for the role of sleep in associative memory processing will be discussed, suggesting that the long‐term goal of sleep may not be the strengthening of individual memory items, but, instead, their ed assimilation into a schema of generalized knowledge. Fourth, the newly emerging benefit of sleep in regulating emotional brain reactivity will be considered. Finally, and building on this latter topic, a novel hypothesis and framework of sleep‐dependent affective brain processing will be proposed, culminating in testable predictions and translational implications for mood disorders.