Abstract: Insomnia, as a common yet complex sleep disorder, arises from the multifaceted interplay of neurobiological, cognitive-behavioral, endocrine, and environmental factors. In recent years, traditional benzodiazepines, as well as non-benzodiazepine drugs such as melatonin receptor agonists and orexin receptor antagonists, have played significant roles in the clinical treatment of insomnia. However, issues such as side effects, dependency, and disruption of normal sleep architecture remain prominent. Consequently, exploring novel sleep-regulating medications has become a research hotspot. Propofol, an intravenous anesthetic widely used in general anesthesia, exerts its sedative effects primarily by enhancing γ-aminobutyric acid A receptor activity. This mechanism may play a role in the treatment of insomnia. Emerging theoretical and preliminary experimental evidence suggests that, with precise dosing regimens, propofol may exert potential effects in improving insomnia. This review outlines the pharmacological properties of propofol and the pathological mechanisms of insomnia, along with their potential interactions. It examines propofol’s possible mechanisms in reducing hyperarousal, balancing the sleep-wake system, modulating neural networks, and attenuating endocrine stress responses. Additionally, the review compares propofol with conventional hypnotics and discusses optimized administration strategies. Finally, it explores future prospects for achieving safe and effective sleep improvement through precision dosing and combination therapies.