But we Christians, who have been redeemed from all this through the precious blood of God's Son, should train and accustom ourselves in faith to despise death and regard it as a deep, strong sweet sleep; to consider the coffin as nothing other than our Lord Jesus' bosom or Paradise, the grave as nothing other than a soft couch of ease or rest. As verily, before God, it truly is just this; for he testifies, John 11:11: Lazarus, our friend sleeps; Matthew 9:24: The maiden is not dead, she sleeps. Thus too, St. Paul in 1 Corinthians 15, removes from sight all hateful aspects of death as related to our mortal body and brings forward nothing but charming and joyful aspects of the promised life. He says there [vv.42ff]: It is sown in corruption and will rise in incorruption; it is sown in dishonor (that is, a hateful, shameful form) and will rise in glory; it is sown in weakness and will rise in strength; it is sown in natural body and will rise a spiritual body.

(Christian Songs Latin and German, For Use at Funerals, from: Works of Martin Luther, Philadelphia: Muhlenberg Press, 1932, Vol. 6, 287-288)

Accordingly we have driven the pestilential abominations from our churches, such as vigils, masses for the dead, processions, purgatory, and all other mockery and hocus pocus on behalf of the dead. We have abolished all these and have cleaned them out thoroughly and do not want our churches to be houses of wailing and places of mourning any longer . . . Nor do we sing any funereal hymns or doleful songs over our dead and at the graves, but comforting hymns, of the forgiveness of sins, of rest, of sleep, of life, and of the resurrection of Christians who have died . . .

Reacting to the Roman doctrine of purgatory, Luther on occasion described the intermediate state as a kind of sleep. At death the believer sleeps in the grave awaiting the Last Judgment rather than enduring purgatory . . . in that state the soul is less than fully conscious . . . Luther was not dogmatic on this issue, and in later writings he appears to have softened this position.

[my emphasis; three passages from Luther were also cited and can be seen online, but I didn't include them here because I couldn't access the documentation on Google Book Search]

The scriptural mode of referring to "the sleep of the dead" inclined him to adopt the theory of a sleep of the soul, in which it shall not know where it is until the Day of Judgment. This, he acknowledges in 1522 to Amsdorf, who asked him for his opinion on the subject. . . . he did not venture to regard such a state of sleep as universal. It merely appears probable to him that the majority of the dead are in such a state. The inclination to this view must also have helped to undermine for Luther the very foundations of the theory of purgatory. Thus, he writes in the letter to Amsdorf, that purgatory is for him not a place, but an inner condition, namely, a foretaste of hell in this present life, such as Jesus, David, Job and many others experienced (in this world). . . . As opposed to the theory, that all souls tarrying between heaven and earth are in purgatory, he again points to the sleep which may be their condition.

(The Theology of Luther: In Its Historical Development and Inner Harmony, Philadelphia: Lutheran Publication Society, 1897, Vol. I, p. 471)

As to purgatory, I think it a very uncertain thing. It is probable, in my opinion, that, with very few exceptions indeed, the dead sleep in utter insensibility till the day of judgment.

(The Life of Luther, Jules Michelet; translated by William Hazlitt, London: H.G. Bohn, second edition, 1862, p. 133)