Background: Poor sleep is common after stroke, and data regarding its effect on rehabilitation outcomes are limited. Controversial evidence was found concerning the effect of sedatives on improving sleep quality in poor sleepers after stroke. Aim: To assess the prevalence of poor sleep in post-stroke patients and its effect on rehabilitation outcomes. Method: A total of 104 stroke patients from two major stroke rehabilitation units in Western Australia was enrolled. Sleep quality was assessed using the Pittsburgh Sleep Quality Indexes at baseline and after stroke. The main outcome measures were Functional Independence Measure (FIM) change and length of stay (LOS). Sedative use during this period was also recorded. Results: A total of 29.8% post-stroke patients suffered from poor sleep. There was no relationship between poor sleep and the stroke characteristics, such as severity, side and type, or demographics, such as age and gender. Poor sleep quality was inversely associated with rehabilitation outcomes measured by FIM (Rs. −0.317, P = 0.005). However, there was no significant association between sleep quality and LOS (P = 0.763). Sedatives were used in 18.2% of patients but had no impact on sleep quality or rehabilitation outcomes. Conclusion: This research supported that poor sleep was frequent after stroke and had negative effects on rehabilitation outcomes. Use of sedatives was of limited benefit to improve sleep quality, and further studies are required to search for strategies to improve sleep problems after stroke.