Circadian rhythmicity and sleep homeostasis interact to regulate sleep-wake cycles [1-4], but the genetic basis of individual differences in sleep-wake regulation remains largely unknown [5]. PERIOD genes are thought to contribute to individual differences in sleep timing by affecting circadian rhythmicity [6], but not sleep homeostasis [7, 8]. We quantified the contribution of a variable-number tandem-repeat polymorphism in the coding region of the circadian clock gene PERIOD3 (PER3) [9, 10] to sleep-wake regulation in a prospective study, in which 24 healthy participants were selected only on the basis of their PER3 genotype. Homozygosity for the longer allele (PER3(5/5)) had a considerable effect on sleep structure, including several markers of sleep homeostasis: slow-wave sleep (SWS) and electroencephalogram (EEG) slow-wave activity in non-rapid eye movement (non-REM) sleep and theta and alpha activity during wakefulness and REM sleep were all increased in PER3(5/5) compared to PER3(4/4) individuals. In addition, the decrement of cognitive performance in response to sleep loss was significantly greater in the PER3(5/5) individuals. By contrast, the circadian rhythms of melatonin, cortisol, and peripheral PER3 mRNA expression were not affected. The data show that this polymorphism in PER3 predicts individual differences in the sleep-loss-induced decrement in performance and that this differential susceptibility may be mediated by its effects on sleep homeostasis.