BACKGROUND: Insomnia is prevalent and distressing but access to the first-line treatment, cognitive behavioural therapy (CBT), is extremely limited. We aimed to assess the clinical and cost-effectiveness of sleep restriction therapy, a key component of CBT, which has the potential to be widely implemented. METHODS: We did a pragmatic, superiority, open-label, randomised controlled trial of sleep restriction therapy versus sleep hygiene. Adults with insomnia disorder were recruited from 35 general practices across England and randomly assigned (1:1) using a web-based randomisation programme to either four sessions of nurse-delivered sleep restriction therapy plus a sleep hygiene booklet or a sleep hygiene booklet only. There was no restriction on usual care for either group. Outcomes were assessed at 3 months, 6 months, and 12 months. The primary endpoint was self-reported insomnia severity at 6 months measured with the insomnia severity index (ISI). The primary analysis included participants according to their allocated group and who contributed at least one outcome measurement. Cost-effectiveness was evaluated from the UK National Health Service and personal social services perspective and expressed in terms of incremental cost per quality-adjusted life year (QALY) gained. The trial was prospectively registered (ISRCTN42499563). FINDINGS: Between Aug 29, 2018, and March 23, 2020 we randomly assigned 642 participants to sleep restriction therapy (n=321) or sleep hygiene (n=321). Mean age was 55·4 years (range 19-88), with 489 (76·2%) participants being female and 153 (23·8%) being male. 580 (90·3%) participants provided data for at least one outcome measurement. At 6 months, mean ISI score was 10·9 (SD 5·5) for sleep restriction therapy and 13·9 (5·2) for sleep hygiene (adjusted mean difference -3·05, 95% CI -3·83 to -2·28; p<0·0001; Cohen's d -0·74), indicating that participants in the sleep restriction therapy group reported lower insomnia severity than the sleep hygiene group. The incremental cost per QALY gained was £2076, giving a 95·3% probability that treatment was cost-effective at a cost-effectiveness threshold of £20 000. Eight participants in each group had serious adverse events, none of which were judged to be related to intervention. INTERPRETATION: Brief nurse-delivered sleep restriction therapy in primary care reduces insomnia symptoms, is likely to be cost-effective, and has the potential to be widely implemented as a first-line treatment for insomnia disorder. FUNDING: The National Institute for Health and Care Research Health Technology Assessment Programme.