Insomnia Disorder (ID) is the second-most common mental disorder and has a far-reaching impact on daytime functioning. A meta-analysis indicates that, of all cognitive domains, declarative memory involving the hippocampus is most affected in insomnia. Hippocampal functioning has consistently been shown to be sensitive to experimental sleep deprivation. Insomnia however differs from sleep deprivation in many aspects, and findings on hippocampal structure and function have been equivocal. The present study used both structural and resting-state functional Magnetic Resonance Imaging in a larger sample than previously reported to evaluate hippocampal volume and functional connectivity in ID. Included were 65 ID patients (mean age = 48.3 y ± 14.0, 17 males) and 65 good sleepers (mean age = 44.1 y ± 15.2, 23 males). Insomnia severity was assessed with the Insomnia Severity Index (ISI), subjective sleep with the Consensus Sleep Diary (CSD) and objective sleep by two nights of polysomnography (PSG). Seed-based analysis showed a significantly stronger connectivity of the bilateral hippocampus with the left middle frontal gyrus in ID than in controls (p = .035, cluster based correction for multiple comparisons). Further analyses across all participants moreover showed that individual differences in the strength of this connectivity were associated with insomnia severity (ISI, r = 0.371, p = 9.3e-5) and with subjective sleep quality (CSD sleep efficiency, r = -0.307, p = .009) (all p FDR-corrected). Hippocampal volume did not differ between ID and controls. The findings indicate more severe insomnia and worse sleep quality in people with a stronger functional connectivity between the bilateral hippocampus and the left middle frontal gyrus, part of a circuit that characteristically activates with maladaptive rumination and deactivates with sleep.