Objective: Sleep and optimism are important psycho-biological and personality constructs, respectively. However, very little work has examined the causal relationship between them, and none has examined the potential mechanisms operating in the relationship. This study aimed to understand whether sleep quality was a cause or an effect of optimism, and whether depressive mood could explain the relationship. Method: Internet survey data were collected from 987 Chinese working adults (63.4% female, 92.4% full-time workers, 27.0% married, 90.2% Hong Kong residents, mean age = 32.59 at three time-points, spanning about 19 months). Measures included a Chinese attributional style questionnaire, the Pittsburgh Sleep Quality Index, and the Depression Anxiety Stress Scale. Results: Cross-sectional analyses revealed moderate correlations among sleep quality, depressive mood, and optimism. Cross-lagged analyses showed a bidirectional causality between optimism and sleep. Path analysis demonstrated that depressive mood fully mediated the influence of optimism on sleep quality, and it partially mediated the influence of sleep quality on optimism. Conclusion: Optimism improves sleep. Poor sleep makes a pessimist. The effects of sleep quality on optimism could not be fully explained by depressive mood, highlighting the unique role of sleep on optimism. Understanding the mechanisms of the feedback loop of sleep quality, mood, and optimism may provide insights for clinical interventions for individuals presented with mood-related problems.