The novel wake-promoting agent modafinil has been in use for the treatment of several sleep disorders for a few years and is now undergoing clinical trials for its use in the treatment of stimulant addiction, but its primary mechanism of action remains elusive. Previous laboratory studies have shown that modafinil has antioxidative and neuroprotective effects, which have not previously been suggested to be related to its wake-promoting effects. However, recent research indicates that free radicals may be related to sleep induction as well as cellular damage, suggesting that a common target of action may mediate modafinil’s ability to oppose both of these effects. In this review we summarize and discuss previously published research on modafinil’s neural, cytoprotective, and cognitive effects, and we propose possible primary biochemical targets that could underlie the effects of modafinil observed in these studies. We also suggest neurocognitive mechanisms responsible for modafinil’s cognitive enhancing effects and its therapeutic potential in the treatment of stimulant addiction.