Sleep states and transitions between them are regulated by diverse neuronal populations found throughout the brain and are influenced by homeostatic sleep pressure. The preoptic area (POA) in the anterior hypothalamus is crucial for sleep, where most neurons are active during rapid eye movement sleep (REMs). In contrast, the tuberomammillary nucleus with histamine neurons (TMN HIS) regulates wakefulness. Interactions between the POA and TMN are thought to occur through mutual inhibition such that if one population becomes active this inhibits the opposing nuclei. The POA sends dense GABAergic projections to the TMN (POA GAD2→TMN) that are critical for sleep regulation. While the POA and TMN are known to be involved in sleep and wake respectively, it is still unknown how they mutually interact to regulate REMs and whether they integrate homeostatic pressure for REMs. This dissertation seeks to elucidate a circuit mechanism by which interactions between the POA and TMN regulate neural and homeostatic REMs. This research used a multidisciplinary approach in the context of spontaneous sleep or during high REMs pressure incorporating genetic mouse models to label specific cell types, fiber photometry to record in vivo neural activity, and inhibitory optogenetics to manipulate cell bodies and axon projections. We show that the POA GAD2→TMN neurons gradually increase activity during NREMs → REMs transitions, while TMN HIS neurons progressively decrease activity during NREMs. Sustained optogenetic inhibition of POA GAD2→TMN neurons reduces REMs, whereas inhibition of TMNHIS neurons increases REMs, suggesting that the POA GAD2→TMN neurons are necessary for REMs regulation. To probe whether the POA GAD2→TMN neurons encode homeostatic REMs pressure, we implemented a novel REMs restriction protocol that produces stereotypical REMs rebound behavior. During heightened REMs pressure, the POA GAD2→TMN neural activity becomes more frequent during NREMs, suggesting an adaptive mechanism to drive entry into REMs. Moreover, sustained optogenetic inhibition of POA GAD2→TMN neurons during high REMs pressure decreases REMs and attenuates the REMs rebound. Collectively, we identify a neural mechanism by which the POA GAD2→TMN and TMN HIS neurons coordinate their activity for REMs and a homeostatic mechanism of a hypothalamic circuit whose activity mirrors the buildup of homeostatic REMs pressure during restriction and that is necessary for REMs rebound.