BACKGROUND: Insomnia, defined as repeated difficulties getting or staying asleep, is common in the general population. Such sleep difficulties are a problem in their own right, but increasingly it is being recognised that they may also be a contributory factor in the development of a wide range of mental health problems. Our focus is upon the relationship between insomnia and psychotic experiences, such as paranoia and hallucinations. Psychotic experiences commonly occur in mild forms in the general population and have been linked to disrupted sleep. These psychotic-like experiences raise the risk of development of a clinical disorder. Our aim is to reduce insomnia in a large general population group, and examine the effect on paranoia and hallucinations at the age when mental health problems typically emerge. The primary hypotheses are that cognitive behaviour therapy (CBT) for insomnia will reduce insomnia and also levels of paranoia and hallucinations. The theoretical links will be substantiated by a planned mediation analysis. Improvements in a number of other mental health outcomes are also predicted. METHODS/DESIGN: We will carry out a parallel group, randomised controlled trial of 2,614 students with insomnia in universities across the UK. In the Oxford Access for Students Improving Sleep (OASIS) trial, participants will be randomised to digital CBT for insomnia (in addition to treatment as usual) or treatment as usual. Online assessments will take place at zero, three, 10 (post-treatment), and 22 (follow-up) weeks. Primary outcomes are insomnia and psychotic-like experiences (paranoia or hallucinatory experiences) at 10 weeks. Secondary outcomes are levels of mania, depression, anxiety, nightmares, psychological wellbeing, and the development of mental health disorders. All main analyses will be carried out at the end of the last follow-up assessment and will be based on the intention-to-treat principle. The trial is funded by the Wellcome Trust. DISCUSSION: This study will be the first large-scale causal test of the relationship between sleep disturbance and psychotic experiences. It will provide evidence concerning the clinical effects of treating insomnia in young adults. TRIAL REGISTRATION: This trial was registered with Current Controlled Trials (identifier: ISRCTN61272251 ) on 29 January 2015.