The study investigates information processing operations in rapid eye movement (REM) sleep and stages of non-REM sleep. An eclectic approach was used in the study whereby the effect of external auditory stimuli was investigated on both the peaks in the event-related potentials (ERP) waveform and on the oscillatory responses that contribute to the morphology of this waveform. Data on overnight sleep were acquired from 12 healthy, young adult, volunteer men; those on the awake stage were obtained from 21 matched men. Brain activity was obtained in response to auditory stimuli (2000 Hz deviant and 1000 Hz standard stimuli: 65 dB, 10 msec r/f time, 50 msec duration) under the passive oddball paradigm in sleep and the active and passive oddball paradigms in wakefulness. The effect of the experimental variables (stimulus type, sleep stage) on ERP peak amplitudes was studied through analysis of variance for repeated measures. The contribution. of the oscillatory responses to the ERP peaks was studied using stepwise multiple regression. As represented with the amplitude of the ERP peaks and the oscillatory responses, auditory information processing selectively varied in different stages of sleep. Processing took longer in sleep: comparable peaks were obtained at longer latencies and later components appeared that did not exist in wakefulness. With. a long-duration theta activity and greater differentiation between the deviant- and standard-elicited stimuli, Stage 2 appeared to represent effortful cognitive processing. As represented with only the earlier peaks and the insignificant delta activity, REM represented less extended cognitive processing.