Answer by Christopher Maloney:

Think of melatonin as a direct sedating agent that already appears in the body's biochemical cascade. Melatonin has "direct inhibitory effects…upon several ACTH responses in the human adrenal gland" Melatonin exerts direct inhibitory actions on ACTH responses in the human adrenal gland. Insomniacs tend to have a higher level of ACTH and arousal. Adrenocorticotropic Hormone (ACTH) and the Circadian Rhythm So by opposing arousal, melatonin can aid in falling asleep.

In a study of athletes (taking 100 mg of melatonin daily) melatonin "reduced the nocturnal activity and the activity and position during lunch/nap time." Melatonin also provided the athletes with: "a longer nocturnal steady state and a smaller reduction when arising at morning." By increasing sleep efficiency, melatonin can decrease the time needed to reach the necessary amount of sleep. The benefits of four weeks of melatonin treatment on circadian patterns in resistance-trained athletes.

Why does melatonin decrease the amount of needed sleep?