To further advance assessment of patient-reported outcomes, the European Organisation of Research and Treatment of Cancer (EORTC) Quality of Life Group has developed computerized adaptive test (CAT) versions of all EORTC Quality of Life Core Questionnaire (QLQ-C30) scales/items. The aim of this study was to develop and evaluate an item bank for CAT measurement of insomnia (CAT-SL). In line with the EORTC guidelines, the developmental process comprised four phases: (I) defining the concept insomnia and literature search, (II) selection and formulation of new items, (III) pre-testing and (IV) field-testing, including psychometric analyses of the final item bank. In phase I, the literature search identified 155 items that were compatible with our conceptualisation of insomnia, including both quantity and quality of sleep. In phase II, following a multistep-approach, this number was reduced to 15 candidate items. Pre-testing of these items in cancer patients (phase III) resulted in an item list of 14 items, which were field-tested among 1094 patients in phase IV. Psychometric evaluations showed that eight items could be retained in a unidimensional model. The final item bank yielded greater measurement precision than the original QLQ-C30 insomnia item. It was estimated that administering two or more items from the insomnia item bank with CAT results in a saving in sample size between approximately 15–25%. The 8-item EORTC CAT-SL item bank facilitates precise and efficient measurement of insomnia as part of the EORTC CAT system of health-related quality life assessment in both clinical research and practice.