Sleep disturbance is a symptom of and a well-known risk factor for depression. Further, atypical functioning of the HPA axis has been linked to the pathogenesis of depression. The purpose of this study was to examine the role of adolescent HPA axis functioning in the link between adolescent sleep problems and later depressive symptoms. Methods: A sample of 157 17–18 year old adolescents (61.8% female) completed the Pittsburgh Sleep Quality Inventory (PSQI) and provided salivary cortisol samples throughout the day for three consecutive days. Two years later, adolescents reported their depressive symptoms via the Center for Epidemiological Studies Depression Scale (CES-D). Results: Individuals (age 17–18) with greater sleep disturbance reported greater depressive symptoms two years later (age 19–20). This association occurred through the indirect effect of sleep disturbance on the cortisol awakening response (CAR) (indirect effect = 0.14, 95%CI [.02 -.39]). Conclusions: One pathway through which sleep problems may lead to depressive symptoms is by up-regulating components of the body’s physiological stress response system that can be measured through the cortisol awakening response. Behavioral interventions that target sleep disturbance in adolescents may mitigate this neurobiological pathway to depression during this high-risk developmental phase.