The inhibitory neurotransmitter gamma-aminobutyric acid (GABA) has long been implicated in the anxiolytic, amnesic, and sedative behavioral effects of alcohol. A large number of studies have investigated the interactions of alcohol with GABA receptors. Many investigators have reported effects of "high concentrations" (50-100 mM) of alcohol on GABA-mediated synaptic inhibition, but effects of the "low concentrations" (1-30 mM) of alcohol normally associated with mild intoxication have been elusive until recently. A novel form of "tonic inhibition" has been described in the central nervous system (CNS) that is generated by the persistent activation of extrasynaptic gamma-aminobutyric acid type A receptors (GABAA-Rs). These receptors are specific GABAA-R subtypes and distinct from the synaptic subtypes. Tonic inhibition regulates the excitability of individual neurons and the activity and rhythmicity of neural networks. Interestingly, several reports show that tonic inhibition is sensitive to low concentrations of alcohol. The thalamus is a structure that is critically important in the control of sleep and wakefulness. GABAergic inhibition in the thalamus plays a crucial role in the generation of sleep waves. Among the various GABAA-R subunits, the alpha1, alpha4, beta2, and delta subunits are heavily expressed in thalamic relay nuclei. Tonic inhibition has been demonstrated in thalamocortical relay neurons, where it is mediated by alpha4beta2delta GABAA-Rs. These extrasynaptic receptors are highly sensitive to gaboxadol, a novel hypnotic, but insensitive to benzodiazepines. Tonic inhibition is absent in thalamic relay neurons from alpha4 knockout mice, as are the sedative and analgesic effects of gaboxadol. The sedative effects of alcohol can promote sleep. However, alcohol also disrupts the normal sleep pattern and reduces sleep quality. As a result, sleep disturbance caused by alcohol can play a role in the progression of alcoholism. As an important regulator of sleep cycles, inhibition in the thalamus may therefore be involved in both the sedative effects of alcohol and the development of alcoholism. Investigating the effects of alcohol on both synaptic and extrasynaptic GABAA-Rs in the thalamus should help us to understand the mechanisms underlying the interaction between alcohol and sleep.