Recent research is beginning to reveal an intricate relationship between sleep and decision-making. The Iowa Gambling Task (IGT) is a unique decision-making task that relies on the ventromedial prefrontal cortex (vmPFC), an area that integrates and weighs previous experiences with reward and loss to select choices with the highest overall value. Recently, it has been demonstrated that a period of sleep can enhance decision-making on this task. Our study investigated the sleep mechanisms (sleep stages and cortical activity) that underlie this improvement. We recorded electrophysiology for 3 consecutive nights: a habituation, baseline, and acquisition night. On acquisition night participants were administered either a 200-trial IGT (IGT group; n = 13) or a 200-trial control (IGT-control group; n = 8) version of the task prior to sleep. Compared with baseline, the IGT group had a significant increase in theta frequency (4 Hz–8 Hz) on cites located above vmPFC and left prefrontal cortex during REM sleep. This increase correlated with subsequent performance improvement from deck B, a high reward deck with negative long-term outcomes. Furthermore, presleep emotional arousal (measured via skin conductance response) toward deck B correlated to increased theta activity above the right vmPFC during REM sleep. Overall, these results suggests that insight into deck B may be enhanced via vmPFC theta activity during REM sleep and REM sleep may have distinct mechanisms for processing decision-making information.