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One particular area of contention in discussions of Freudian dream theory and its relation to the neuroscientific evidence is the notion of “disguise-censorship” and its relation to dream bizarreness. The discussion to date, however, has neglected the conceptual basis of repression and disguise-censorship, and this paper aims to clarify the role of repression in dreaming and its contribution to dream bizarreness. An analysis of disguise-censorship and repression reveals two competing accounts in Freud's theory. Freud's account of the “dream-censor”, acting as an agency intentionally disguising cognitive content, is found to be problematic. However, Freud's alternative account of repression, in terms of cognitive inhibition instigated by motivational conflict, is developed and discussed in relation to neural inhibition. On this view, dream bizarreness arises, in part, through interdrive competition preventing direct expression of wishes and the subsequent formation of substitute aims. Resolution of certain contradictions and inconsistencies between the neurological evidence and Freudian dream theory is discussed.