Being bullied by peers at school is associated with numerous intrapersonal, interpersonal, and health problems. Depression is one of the strongest correlates of victimization and, although it may precede victimization, there is convincing evidence of victimization leading to later depression. Victimization has also been found to be related to sleeping problems, both concurrently and longitudinally. Using structural equation modeling, we tested the hypothesis that the effect of victimization on depression is partly mediated by sleeping difficulties. The mean age of the participants (N = 1717) was 16 years, and they were from 20 schools in seven towns in Southern and South-West Finland. We focused on two types of sleeping problems—insomnia and nightmares—among students who had recently made the transition to secondary education in Finland. We controlled for the effects of sex (girls and others in relation to boys) and school type (high school/vocational school). Besides a significant direct effect of victimization on depression (β = .21, p < .001), there were significant indirect effects via both insomnia (β = .04, p = .008) and nightmares (β = .03, p = .002). The findings suggest that sleeping problems may be indicative of peer victimization, and they are one possible mechanisms via which the effects of victimization on depression unfold.