Insomnia is a well-established risk factor for late-life depression, yet the intermediary mechanisms are not known. One plausible mechanism is dysregulation of the reward system, a common feature of depression. The main objective of the current study was to determine whether late-life insomnia is associated with reduced motivation and reduced sensitivity for monetary reward. Secondary exploratory objectives were to test for sex-specific effects and whether elevated inflammation potentiated these associations. Nondepressed community dwelling older adults (n = 104; aged 60-80) who either met (n = 31) or did not meet (n = 73) criteria for insomnia disorder as assessed by the Structured Clinical Interview for DSM-5 completed the Effort Expenditure for Rewards Task and provided blood samples for the assessment of C-reactive protein (CRP). Older adults with late-life insomnia showed reduced reward motivation 95% CI [-0.955, -0.569] and reduced reward sensitivity 95% CI [-0.430, -0.075] relative to comparison controls. In secondary exploratory analyses, late-life insomnia was associated with reduced motivation to a greater degree in males than in females 95% CI [0.072, 0.775], particularly when CRP was also elevated 95% CI [0.672, 1.551]. Late-life insomnia is associated with reduced motivation and sensitivity for monetary reward, which suggests insomnia may confer risk for late-life depression by dysregulation of reward mechanisms. Exploratory analyses suggest that older males with insomnia and elevated CRP may be particularly vulnerable to deficits in reward motivation. Although in need of replication and further study, results suggest that interventions that target insomnia or deficits in reward processing may mitigate the risk of depression in nondepressed older adults, especially older males with insomnia.