Insomnia is one of the most common sleep disorders worldwide and has become a major public health concern. Acupuncture has long been used to treat insomnia, and clinical studies have confirmed its effectiveness. However, most existing research still explains its therapeutic mechanisms through separate, isolated pathways. A unified regulatory framework is currently lacking. This paper, therefore, attempts to fill that gap. We combine modern neurobiological findings with traditional Chinese medicine (TCM) theory and propose a mechanistic model of acupuncture for insomnia with parasympathetic regulation as its core. To develop this model, we conducted a literature-based theoretical analysis. We reviewed three main topics: (1) the pathogenesis of insomnia in modern medicine and TCM; (2) the role of the parasympathetic nervous system in sleep regulation; and (3) current evidence showing that acupuncture modulates autonomic activity and sleep-related neurotransmitters (e.g., serotonin, GABA, acetylcholine, norepinephrine, dopamine). Based on this evidence, we propose a “parasympathetic-Yin-Yang Ti-Yong integration model”. According to the present data, insomnia can be regarded as a disorder of the autonomic nervous system characterized by decreased parasympathetic activity and an increase in sympathetic activity. This pattern is in line with the TCM pathomechanism of “excessive Yang due to Yin deficiency” and “failure of Yang to enter Yin”, and clinical and mechanistic studies have found that acupuncture can stimulate the parasympathetic nervous system, reduce sympathetic overactivity, and regulate the neurotransmitter system mentioned above. In our model, the parasympathetic nervous system is considered a modern physiological manifestation of Yin, and the sympathetic nervous system corresponds to Yang. Therefore, it is expected that acupuncture will treat insomnia by “supporting Yin and restraining Yang”. That is to say, it is hoped that it can adjust the balance of the autonomic nervous system at a physiological level to promote the transition from wakefulness to sleep. Based on this system, we can optimistically select acupoints according to syndrome diagnosis, adjust stimulation parameters, and use combination therapy reasonably to optimize acupuncture therapy for insomnia. In short, this model has provided an all-system theoretical basis for the effect of acupuncture on insomnia and may serve as an effective foundation for future clinical and mechanistic studies.