Animal studies show that insufficient silencing of the locus coeruleus (LC) during REM sleep impairs sleep-related brain plasticity. Restless REM sleep, a characteristic of several psychiatric disorders, likely reflects insufficient LC silencing. We investigated whether endogenous REM sleep interruptions interfere with overnight reorganization of limbic circuits in human volunteers with a wide range of insomnia severity, from no insomnia complaints to fulfilling community-sample criteria for insomnia disorder. We induced a self-conscious emotion during two functional MRI sessions and recorded sleep EEG in between. Amygdala reactivity decreased overnight in proportion to the total duration of consolidated REM sleep. Restless REM sleep, in contrast, impeded overnight amygdala adaptation. Using targeted memory reactivation with odors tagged to the self-conscious emotional stimulus, we could experimentally enhance both the favorable effect of consolidated REM sleep and the unfavorable effect of restless REM sleep. The findings reveal a maladaptive type of sleep, providing a target for interventions in mental disorders characterized by restless REM sleep.