Study Objectives Patients with narcolepsy suffer from poor maintenance of wakefulness and fragmented night sleep, but the underlying mechanism of sleep boundary dysregulation remains little understood. The goal of this study was to quantify abnormal sleep-wake regulation in narcolepsy patients. Methods Using a model-based approach (state space analysis), we analyzed overnight EEG recordings in ten patients with narcolepsy type 1 and age- and gender-matched healthy control subjects. We analyzed consolidated sleep states using cluster analysis in state space and transitional sleep periods as trajectories between stable clusters. Results Patients with narcolepsy showed a dislocation of REM sleep in state space and overlap of REM and WAKE behavioral states. Narcolepsy patients had more trajectories between the REM and the WAKE clusters, and also between the NREM and WAKE clusters. Point density analysis showed more transitional periods between WAKE and REM in narcolepsy, less consolidated NREM sleep, and higher velocities between WAKE and NREM in patients. Conventional sleep analysis revealed increased NREM1 and decreased NREM2 sleep and reduced REM latency in narcolepsy patients. Conclusions This study provides further evidence for narcolepsy as a disorder of state boundaries including, but not limited to REM sleep and wakefulness. In particular, the increase in transitional periods between REM and WAKE, but also between NREM and WAKE indicates abnormal state dynamics in narcolepsy. This pattern may be a consequence of disrupted sleep/wake stabilizing mechanisms due to loss of hypocretin/orexin neurons in the hypothalamus.