Sleep behaviors play an important role in the experience of chronic pain in adolescence; less well known is the effect of improved sleep in the context of pain rehabilitation. This study examined changes in sleep habits and their association with pain and functioning following day-hospital interdisciplinary pediatric pain rehabilitation. Participants (84 % female) were a cohort of 274 youth (ages 10–18, mean age 14.6 years) with neuropathic or musculoskeletal pain and associated disability who completed measures at admission, discharge, and short term (1–3 month) follow-up. Parents reported on the child’s sleep habits; participants reported on pain, functional disability, and school functioning. Results show that sleep habits improved over the course of intensive pain rehabilitation treatment, with continued improvements at follow-up. Sleep habits at discharge correlated with concurrent measures of functional disability and mood symptoms, with healthier sleep habits being associated with less disability and fewer mood symptoms. Furthermore, greater sleep duration, less sleep onset delay, and fewer night wakings correlated with lower pain intensity ratings at discharge. Controlling for change in pain with treatment, baseline sleep habits, age, and concurrent depressive symptoms, sleep habits at discharge predicted global functioning and school functioning measured at follow-up. There was modest support for changes in sleep habits over the course of treatment predicting pain reduction at follow-up, with decreased night wakings significantly predicting reduced pain intensity at follow-up. Improvements in sleep habits may be one mechanism of efficacy for intensive pediatric pain rehabilitation.