While both sleep and optimism have been found to be predictive of well-being, few studies have examined their relationship with each other. Neither do we know much about the mediators and moderators of the relationship. This study investigated (1) the causal relationship between sleep quality and optimism in a college student sample, (2) the role of symptoms of depression, anxiety, and stress as mediators, and (3) how circadian preference might moderate the relationship. Internet survey data were collected from 1,684 full-time university students (67.6% female, mean age = 20.9 years, SD = 2.66) at three time-points, spanning about 19 months. Measures included the Attributional Style Questionnaire, the Pittsburgh Sleep Quality Index, the Composite Scale of Morningness, and the Depression Anxiety Stress Scale-21. Moderate correlations were found among sleep quality, depressive mood, stress symptoms, anxiety symptoms, and optimism. Cross-lagged analyses showed a bidirectional effect between optimism and sleep quality. Moreover, path analyses demonstrated that anxiety and stress symptoms partially mediated the influence of optimism on sleep quality, while depressive mood partially mediated the influence of sleep quality on optimism. In support of our hypothesis, sleep quality affects mood symptoms and optimism differently for different circadian preferences. Poor sleep results in depressive mood and thus pessimism in non-morning persons only. In contrast, the aggregated (direct and indirect) effects of optimism on sleep quality were invariant of circadian preference. Taken together, people who are pessimistic generally have more anxious mood and stress symptoms, which adversely affect sleep while morningness seems to have a specific protective effect countering the potential damage poor sleep has on optimism. In conclusion, optimism and sleep quality were both cause and effect of each other. Depressive mood partially explained the effect of sleep quality on optimism, whereas anxiety and stress symptoms were mechanisms bridging optimism to sleep quality. This was the first study examining the complex relationships among sleep quality, optimism, and mood symptoms altogether longitudinally in a student sample. Implications on prevention and intervention for sleep problems and mood disorders are discussed.