Besides its role in vision, light impacts physiology and behavior through circadian and direct (aka ‘masking’) mechanisms. In Smith-Magenis syndrome (SMS), the dysregulation of both sleep-wake behavior and melatonin production strongly suggests impaired non-visual light perception. We discovered that mice haploinsufficient for the SMS causal gene, Retinoic acid induced-1 (Rai1), were hypersensitive to light such that light eliminated alert and active-wake behaviors, while leaving time-spent-awake unaffected. Moreover, variables pertaining to circadian rhythm entrainment were activated more strongly by light. At the input level, the activation of rod/cone and suprachiasmatic nuclei (SCN) by light was paradoxically greatly reduced, while the downstream activation of the ventral-subparaventricular zone (vSPVZ) was increased. The vSPVZ integrates retinal and SCN input and, when activated, suppresses locomotor activity, consistent with the behavioral hypersensitivity to light we observed. Our results implicate Rai1 as a novel and central player in processing non-visual light information, from input to behavioral output.