Background Insomnia is frequent in schizophrenia and may contribute to cognitive impairment as well as overuse of weight inducing sedative antipsychotics. We investigated the effects of eszopiclone on sleep and cognition for patients with schizophrenia-related insomnia in a double-blind placebo controlled study, followed by a two-week, single-blind placebo phase. Methods Thirty-nine clinically stable outpatients with schizophrenia or schizoaffective disorder and insomnia were randomized to either 3mg eszopiclone (n =20) or placebo (n =19). Primary outcome measure was change in Insomnia Severity Index (ISI) over 8weeks. Secondary outcome measure was change in MATRICS Consensus Cognitive Battery (MATRICS). Sleep diaries, psychiatric symptoms, and quality of life were also monitored. Results ISI significantly improved more in eszopiclone (mean=−10.7, 95% CI=−13.2; −8.2) than in placebo (mean=−6.9, 95% CI=−9.5; −4.3) with a between-group difference of −3.8 (95% CI=−7.5; −0.2). MATRICS score change did not differ between groups. On further analysis there was a significant improvement in the working memory test, letter–number span component of MATRICS (mean=9.8±9.2, z =−2.00, p =0.045) only for subjects with schizophrenia on eszopiclone. There were improvements in sleep diary items in both groups with no between-group differences. Psychiatric symptoms remained stable. Discontinuation rates were similar. Sleep remained improved during single-blind placebo phase after eszopiclone was stopped, but the working memory improvement in patients with schizophrenia was not durable. Conclusions Eszopiclone stands as a safe and effective alternative for the treatment of insomnia in patients with schizophrenia. Its effects on cognition require further study.