Sleep is under homeostatic control, but the mechanisms that sense sleep need and correct sleep deficits remain unknown. Here, we report that sleep-promoting neurons with projections to the dorsal fan-shaped body (FB) form the output arm of Drosophila's sleep homeostat. Homeostatic sleep control requires the Rho-GTPase-activating protein encoded by the crossveinless-c (cv-c) gene in order to transduce sleep pressure into increased electrical excitability of dorsal FB neurons. cv-c mutants exhibit decreased sleep time, diminished sleep rebound, and memory deficits comparable to those after sleep loss. Targeted ablation and rescue of Cv-c in sleep-control neurons of the dorsal FB impair and restore, respectively, normal sleep patterns. Sleep deprivation increases the excitability of dorsal FB neurons, but this homeostatic adjustment is disrupted in short-sleeping cv-c mutants. Sleep pressure thus shifts the input-output function of sleep-promoting neurons toward heightened activity by modulating ion channel function in a mechanism dependent on Cv-c.