Traditional sleep staging categorizes sleep and wakefulness into five coarse-grained classes, overlooking subtle variations within each stage. It provides limited information about the probability of arousal and may hinder the diagnosis of sleep disorders, such as insomnia. To address this issue, we propose a deep-learning method for automatic and scalable annotation of sleep depth index using existing sleep staging labels. Our approach is validated using polysomnography from over ten thousand recordings across four large-scale cohorts. The results show a strong correlation between the decrease in sleep depth index and the increase in arousal likelihood. Several case studies indicate that the sleep depth index captures more nuanced sleep structures than conventional sleep staging. Sleep biomarkers extracted from the whole-night sleep depth index exhibit statistically significant differences with medium-to-large effect sizes across groups of varied subjective sleep quality and insomnia symptoms. These sleep biomarkers also promise utility in predicting the severity of obstructive sleep apnea, particularly in severe cases. Our study underscores the utility of the proposed method for continuous sleep depth annotation, which could reveal more detailed structures and dynamics within whole-night sleep and yield novel digital biomarkers beneficial for sleep health.