This review describes the role of the pedunculopontine nucleus (PPN) in various functions, including sleep-wake mechanisms, arousal, locomotion and in several pathological conditions. Special emphasis is placed on the auditory input to the PPN and the possible role of this nucleus in the manifestation of the P1 middle latency auditory evoked response. The importance of these considerations is evident because the PPN is part of the cholinergic arm of the reticular activating system. As such, the auditory input to this region may modulate the level of arousal of the CNS and, consequently, abnormalities in the processing of this input can be expected to have serious consequences on the level of excitability of the CNS. The involvement of the PPN in such disorders as schizophrenia, anxiety disorder and narcolepsy is discussed.