Many biological effects of melatonin are produced through activation of melatonin receptors, while others are due to its role as a pervasive and powerful antioxidant, with a particular role in the protection of nuclear and mitochondrial DNA.

In mammals, melatonin is biosynthesized in four enzymatic steps from the essential dietary amino acid tryptophan, with serotonin produced at the second step. Melatonin is secreted into the blood by the pineal gland in the brain. Known as the "hormone of darkness," it is secreted in darkness in both day-active (diurnal) and night-active (nocturnal) animals.

It may also be produced by a variety of peripheral cells such as bone marrow cells, lymphocytes, and epithelial cells. Usually, the melatonin concentration in these cells is much higher than that found in the blood, but it does not seem to be regulated by the photoperiod.

In humans, melatonin is produced by the pineal gland, a small endocrine gland^[24] located in the center of the brain but outside the blood–brain barrier. The melatonin signal forms part of the system that regulates the sleep-wake cycle by chemically causing drowsiness and lowering the body temperature, but it is the central nervous system (specifically the suprachiasmatic nuclei, or SCN)^[24] that controls the daily cycle in most components of the paracrine and endocrine systems^[25][26] rather than the melatonin signal (as was once postulated).

Infants' melatonin levels become regular in about the third month after birth, with the highest levels measured between midnight and 08:00 (8 AM).^[27]

In humans, 90% of melatonin is cleared in a single passage through the liver, a small amount is excreted in urine,^[28] and a small amount is found in saliva.

Human melatonin production decreases as a person ages.^[29] It is believed that as children become teenagers, the nightly schedule of melatonin release is delayed, leading to later sleeping and waking times.^[30]

Besides its function as synchronizer of the biological clock, melatonin also exerts a powerful antioxidant activity. In many less complex life forms, this is its only known function.^[34] Melatonin is an antioxidant that can easily cross cell membranes and the blood–brain barrier.^[6][35] Melatonin is a direct scavenger of OH, O₂⁻, and NO.^[36] Unlike other antioxidants, melatonin does not undergo redox cycling, the ability of a molecule to undergo reduction and oxidation repeatedly. Redox cycling may allow other antioxidants (such as vitamin C) to act as pro-oxidants, counterintuitively promoting free radical formation. Melatonin, on the other hand, once oxidized, cannot be reduced to its former state because it forms several stable end-products upon reacting with free radicals. Therefore, it has been referred to as a terminal (or suicidal) antioxidant.^[37]

Recent research indicates that the first metabolite of melatonin in the melatonin antioxidant pathway may be N(1)-acetyl-N(2)-formyl-5-methoxykynuramine (or AFMK) rather than the common, excreted 6-hydroxymelatonin sulfate. AFMK alone is detectable in unicellular organisms and metazoans. A single AFMK molecule can neutralize up to 10 ROS/RNS (reactive oxygen species/reactive nitrogen species) since many of the products of the reaction/derivatives (including melatonin) are themselves antioxidants. This capacity to absorb free radicals extends at least to the quaternary metabolites of melatonin, a process referred to as "the free radical scavenging cascade." This is not true of other, conventional antioxidants.^[34]

In animal models, melatonin has been demonstrated to prevent the damage to DNA by some carcinogens, stopping the mechanism by which they cause cancer.^[38]

It also has been found to be effective in protecting against brain injury caused by ROS release in experimental hypoxic brain damage in newborn rats.^[39] Melatonin's antioxidant activity may reduce damage caused by some types of Parkinson's disease, play a role in preventing cardiac arrhythmia and possibly increase longevity; it has been shown to increase the average life span of mice by 20% in some studies.^[40][41][42]