Sleep is a pivotal correlate and predictor of many domains of child development, including socioemotional adjustment, physical health, and cognitive functioning. The family plays a major role in shaping children's sleep–wake behaviors, and developmental research on children's sleep in a family context is on the rise. As in any relatively young field, many gaps and questions remain. In this article, we aim to advance this literature by illustrating ways to examine the interconnections between family functioning and children's sleep. We also call for increasing conceptual developments and testing of transactional models, using well‐established and psychometrically sound objective and subjective measures, and expanding both the family functioning domains and sleep parameters assessed.