Posttraumatic Stress Disorder (PTSD) is a frequent consequence of war, affecting 10 to 25% of United States veterans and leading to emotional and cognitive symptoms. Neurocognitive sequelae of PTSD include mild to moderate neuropsychological dysfunction across several domains. Sleep disturbance is also a key feature of PTSD, with 70% of individuals with PTSD endorsing distressing dreams and difficulty maintaining sleep. Few studies have examined how sleep disturbance is related to neurocognitive dysfunction observed in PTSD. The present study aimed to clarify the relationship between PTSD, sleep disturbance, and neurocognitive dysfunction by investigating whether sleep disturbance (i.e., distressing dreams, difficulties maintaining sleep, hours spent asleep) impacts cognitive performance in the domains of attention, processing speed, executive functioning, and memory. Individuals with PTSD exhibited worse memory performance relative to individuals without PTSD, specifically on measures of verbal memory. However, when sleep disturbance was added to the model, the group differences were no longer significant. This suggests that cognitive dysfunction in PTSD may be better explained by sleep disturbance than PTSD per se. These findings highlight the notion that sleep disturbance may be a critical factor in predicting neurocognitive outcome in veterans with PTSD.