The aim of this study was to investigate, in healthy subjects, the modulation of amplitude and phase precision of the auditory steady-state response (ASSR) to 40 Hz stimulation in two resting conditions varying in the level of arousal. Previously, ASSR measures have shown to be affected by the level of arousal, but the findings are somewhat controversial. Generally, ASSR is diminished in sleep but it may be increased in drowsiness. Besides, ASSR reduction has been observed in schizophrenia. However, schizophrenic patients are known to have a disturbance of arousal level, what makes it pertinent to know the effects of fluctuations in arousal on passive response to gamma-range stimulation. In nine healthy volunteers trains of 40 Hz click stimuli were applied during two conditions: in the "high arousal" condition subjects were sitting upright silently reading a book of interest; in the "low arousal" condition subjects were sitting in a reclined position with eyes closed and the lights turned off. The 64-channel EEG data was wavelet transformed and the amplitude and phase precision of the wavelet transformed evoked potential were decomposed by the recently proposed multi-subject non-negative multi-way factorization (NMWF) (Morup et al. in J Neurosci Methods 161:361-368, 2007). The estimates of these measures were subjected to statistical analysis. The amplitude and phase precision of the ASSR were significantly larger during the low arousal state compared to the high arousal condition. The modulation of ASSR amplitude and phase precision by differences in the arousal level during recording warrants caution when investigating oscillatory brain activity and interpreting the findings of reduced ASSR in schizophrenia. It also emphasizes the necessity of standardized recording procedures and monitoring the level of arousal during ASSR testing.