Abstract Older adults with depression have a high incidence of sleep disturbance which is posited to be mechanistically involved in maladaptive overnight emotional memory consolidation. In older adults (≥ 50 years) with and without depression, we aimed to compare group differences in overnight emotional memory and rapid eye movement (REM) and non-rapid eye movement (NREM) (N2 and N3) sleep disturbance. Secondly, we investigated the relationship between emotional memory consolidation, self-report emotional valence and arousal perception, and sleep disturbance. Participants underwent overnight PSG with high-density EEG. An emotional memory image task with concurrent subjective emotional arousal and valence rating was completed before and after sleep. REM sleep disturbance was measured by REM sleep duration, global REM gamma and alpha activity and REM EEG arousal index. NREM sleep disturbance was measured by NREM sleep duration, global NREM delta, alpha and sigma power, and NREM EEG arousal index. T-tests and non-parametric tests were used for group comparisons. Linear regressions were used to assess relationships between sleep disturbance and emotional memory. Twenty-two older adults (Depression: n = 12, Control: n = 10) with a mean age of 63.7 ± 6.5 years completed the study. Older adults with depression demonstrated differences in overnight perception of emotional valence and arousal for negative information, suggesting sleep may be involved in emotion perception. Global delta power in NREM was reduced in older adults with depression, suggestive of homeostatic alterations. However, no robust associations between overnight memory consolidation, emotional valence or arousal and REM or NREM sleep disturbance were observed.