Insomnia has become a significant health issue troubling many people, and the number of sufferers continues to rise each year due to the accelerated pace of modern life. Unlike traditional sedative medications, which may come with side effects and dependency issues, aromatherapy based on essential oils inhalation has garnered widespread attention for its safety, minimal side effects, and ease of use. Hence, various biological evaluation models and clinical trial indicator were firstly reviewed to evaluate the effect of essential oils inhalation on sleep improvement. Additionally, according to different aroma characteristics of essential oils, the sleep-enhancing effects and action mechanisms of essential oils, including floral scents like rose and lavender, citrus scents like orange and bergamot, woody scents like agarwood and sandalwood, and herbal scents like Rhizoma Chuanxiong and perilla, were further summarized. In total, the aim of this paper is to provide a solid scientific basis for the application of essential oils inhalation in sleep improvement.