A seating unit that includes a foldable bed includes: a base with an internal cavity; a foldable bed that includes separate and distinct head, intermediate and seat sections; and a bed folding mechanism. In a folded position, the intermediate and seat sections are generally horizontally disposed and positioned in vertically stacked relationship, and the head section is generally vertically disposed and positioned adjacent a rear portion of the base, with an outer surface of a cushion of the head section forming the rear surface of the seating unit, and in an unfolded position, the head, intermediate and seat sections are generally horizontally disposed and in serial alignment with each other. The bed folding mechanism is attached to the base and the head, intermediate and seat sections and controls the movement of the bed between the folded and unfolded positions.