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The five stages of sleep-stages 1 through 4 and REM sleep--are each associated with distinctive patterns of neurotransmitter activity. This activity is initiated in the reticular formation, which is the core of the brain stem. In all vertebrates, the reticular formation plays a crucial role in sleep and arousal. Damage to the reticular formation can result in coma and death.
Three important neurotransmitters involved in sleep are serotonin, epinephrine, and acetylcholine. As sleep begins, the levels of neurotransmitters sent to the forebrain from the reticular formation start dropping. They continue to fall until reaching their lowest level during the deepest period of sleep, stage 4.
REM sleep (stage 5) is initiated by a rise in acetylcholine, which activates the cerebral cortex while the rest of the brain remains relatively inactive. REM sleep is terminated by a rise in serotonin and norepinephrine, which increase the level of forebrain activity nearly to the awake state. You are most likely to wake up just after a REM period. If you don't wake up then, the level of these neurotransmitters begins to fall again, and you enter another sleep cycle.