Objective Sleep disturbances are a core and salient feature of posttraumatic stress disorder (PTSD). Pilot studies have indicated that combined cognitive‐behavioral therapy for insomnia (CBT‐I) and imagery rehearsal therapy (IRT) for nightmares improves sleep as well as PTSD symptoms. Method The present study randomized 40 combat veterans (mean age 37.7 years; 90% male and 60% African American) who served in Afghanistan and/or Iraq (Operation Enduring Freedom [OEF] / Operation Iraqi Freedom [OIF]) to 4 sessions of CBT‐I with adjunctive IRT or a waitlist control group. Two thirds of participants had nightmares at least once per week and received the optional IRT module. Results At posttreatment, veterans who participated in CBT‐I/IRT reported improved subjectively and objectively measured sleep, a reduction in PTSD symptom severity and PTSD‐related nighttime symptoms, and a reduction in depression and distressed mood compared to the waitlist control group. Conclusion The findings from this first controlled study with OEF/OIF veterans suggest that CBT‐I combined with adjunctive IRT may hold promise for reducing both insomnia and PTSD symptoms. Given the fact that only half of the patients with nightmares fully implemented the brief IRT protocol, future studies should determine if this supplement adds differential efficacy to CBT‐I alone.