To further our understanding of how gonadal steroids impact sleep biology, we sought to address the mechanism by which proestrus levels of cycling ovarian steroids, particularly estradiol (E2), suppress sleep in female rats. We showed that steroid replacement of proestrus levels of E2 to ovariectomized female rats, suppressed sleep to similar levels as those reported by endogenous ovarian hormones. We further showed that this suppression is due to the high levels of E2 alone, and that progesterone did not have a significant impact on sleep behavior. We found that E2 action within the Median Preoptic Nucleus (MnPN), which contains estrogen receptors (ERs), is necessary for this effect; antagonism of ERs in the MnPN attenuated the E2-mediated suppression of both non-Rapid Eye Movement (NREM) and Rapid Eye Movement (REM) sleep. Finally, we found E2 action at the MnPN is also sufficient for sleep suppression, as direct infusion of E2 into the MnPN suppressed sleep. Based on our findings, we predict proestrus levels of E2 alone, acting at the MnPN, mediate sex-hormone driven suppression of sleep in female rats. Furthermore, our findings have demonstrated that E2 has different effects on sleep time and slow wave activity (NREM-SWA), a measure of the homeostatic efficiency of sleep, under conditions of normal sleep and sleep deprivation. E2 serves to decrease NREM-SWA, but not sleep time, in the light phase under normal sleep, while in recovery, E2 decreases sleep time but not NREM-SWA following deprivation. We further found that E2 increased levels of extracellular adenosine, a measure of homeostatic sleep need, under both normal and deprivation sleep conditions. To resolve the discrepancy between the decrease in behavioral markers associated with homeostatic sleep need and increase in levels of adenosine, we employed an agonist of the A2A receptor to stimulate the adenosinergic sleep pressure system. These studies show that E2 blunts the ability of the A2A agonist to drive sleep behavior, showing an interposition of E2 into the adenosinergic sleep pressure system. Overall, these experiments show an interaction between E2 and adenosinergic homeostatic sleep pressure at the level of the MnPN.