Studies suggest that sleep supports persistent changes in the neuronal representation of emotional experiences such that they are remembered better and less distressful when recalled than when they were first experienced. It is conceivable that sleep fragmentation by arousals, a key characteristic of insomnia disorder, could hamper the downregulation of distress. In this study, we sought further support for the idea that insomnia disorder may involve a lasting deficiency to downregulate emotional distress. We used functional MRI in insomnia disorder (n = 27) and normal sleepers (n = 30) to identify how brain activation differs between novel and relived self-conscious emotions. We evaluated whether brain activity elicited by reliving emotional memories from the distant past resembles the activity elicited by novel emotional experiences more in insomnia disorder than in normal sleepers. Limbic areas were activated during novel shameful experiences as compared to neutral experiences in both normal sleepers and insomnia disorder. In normal sleepers, reliving of shameful experiences from the past did not elicit a limbic response. In contrast, participants with insomnia disorder recruited overlapping parts of the limbic circuit, in particular the dorsal anterior cingulate cortex, during both new and relived shameful experiences. The differential activity patterns with new and old emotions in normal sleepers suggest that reactivation of the long-term memory trace does not recruit the limbic circuit. The overlap of activations in insomnia disorder is in line with the hypothesis that the disorder involves a deficiency to dissociate the limbic circuit from the emotional memory trace. Moreover, the findings provide further support for a role of the anterior cingulate cortex in insomnia.