Prader–Willi syndrome (PWS), a genetic disorder of obesity, intellectual disability and sleep abnormalities, is caused by loss of non-coding RNAs on paternal chromosome 15q11-q13. The imprinted minimal PWS locus encompasses a long non-coding RNA (lncRNA) transcript processed into multiple SNORD116 small nucleolar RNAs and the spliced exons of the host gene, 116HG. However, both the molecular function and the disease relevance of the spliced lncRNA 116HG are unknown. Here, we show that 116HG forms a subnuclear RNA cloud that co-purifies with the transcriptional activator RBBP5 and active metabolic genes, remains tethered to the site of its transcription and increases in size in post-natal neurons and during sleep. Snord116del mice lacking 116HG exhibited increased energy expenditure corresponding to the dysregulation of diurnally expressed Mtor and circadian genes Clock, Cry1 and Per2. These combined genomic and metabolic analyses demonstrate that 116HG regulates the diurnal energy expenditure of the brain. These novel molecular insights into the energy imbalance in PWS should lead to improved therapies and understanding of lncRNA roles in complex neurodevelopmental and metabolic disorders.