Not all kinds of irrationality are equal. The comparative study of dreams, brain damage, and psychopathology can reveal the “grammar of irrationality,” the rules of what can and cannot happen in various states of consciousness. We may then modify and refine the properties of the “system unconscious” described by Freud (1915). Examples are provided of “disjunctive cognitions” and “interobjects” which suggest constraints on the irrational combinations and distortions that are possible in dreams. Further exploration of these phenomena and their underlying neural mechanisms may help clarify the neurobiology of transference. Unusual experiences of nested reality in dreams suggest also that reality may be a quality that our minds can apply to an experience. We should study not only “reality testing,” but also “reality assignment.”