Symptom
Internet sharing does not work when the computer is in sleep mode.
Solution
Because of this, Mac OS X 10.4 and later prevent idle sleep when Internet Sharing is active. For earlier systems, just don't let the sharing computer sleep:
1. Choose Apple menu > System Preferences.
2. Choose View > Energy Saver.
3. Drag the "Put the computer to sleep when it is inactive for" slider to Never.
Note: The display sleep setting does not affect this issue. You can set it to whatever you like.