Neurophysiological studies of sleep have increasingly focused on underlying dynamic processes. This would appear particularly relevant to the developmental aspects of sleep. Involvement of sleep-dependent mechanisms in emotional processing, as well as perceptual-sensory, perceptual-motor, and cognitive learning, mostly studied in adults, may play major roles in development. Rapid eye movement (REM) sleep, which is generated by complex neuronal interactions within the pontine reticular formation, and non-REM sleep, which arises from activities in the thalamocortical network, are specifically implicated in different aspects of long-term memory systems. They evolve from previous physiological and behavioural states which can be traced back to the fetal period. Further studies are needed to clearly identify functions reflected by hallmarks of sleep stages, such as spindles and K complexes. A better understanding of the maturational aspects of sleep should provide important insights into physiological development. Assessment approaches taking dynamic characteristics of sleep into account may contribute to the design of better targeted management of sleep-related problems in neurodevelopmental conditions.