We don’t really know but the DSM estimates between 1 and 6% of children and many fewer adults have this experience. You are more likely to have this happen if you are related to someone who has had this happen, but we have no idea why. It usually just goes away in adolescence. If my parents had been the type to take their kids to mental health professionals, I almost certainly would have gotten this diagnosis as a kid. If so, and if my parents had been the drug-giving kind, I might have been prescribed a benzodiazepine (like Valium) for it. Generally, though, it can be treated by comforting your child when they wake up like this, until it goes away. If you think there might have been a triggering event for the condition, therapy might be helpful.
Here are the criteria, quoted word-for-word from the Diagnostic and Statistical Manual of Mental Disorders IV-TR, page 639:
Diagnostic criteria for 307.46 Sleep Terror Disorder
A. Recurrent episodes of abrupt awakening from sleep, usually occurring during the first third of the major sleep episode and beginning with a panicky scream.
B. Intense fear and signs of autonomic arousal, such as tachycardia, rapid breathing, and sweating, during each episode.
C. Relative unresponsiveness to efforts of others to comfort the person during the episode.
D. No detailed dream is recalled and there is amnesia for the episode.
E. The episodes cause clinically significant distress or impairment in social, occupational, or other important areas of functioning.
F. The disturbance is not due to the direct physiological effects of a substance (e.g., a drug of abuse, a medication) or a general medical condition.
[First published on Nathen’s Miraculous Escape, January 29, 2011.]