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The conclusions in this paper are based on material from relatively normal clinic children seen by several staff members. The author concludes that the extreme anxiety of the nightmare derives not only from current conflicts but reactivated fears from an earlier period when the ego was more vulnerable. A complex interrelation of several factors in the precipitation of the nightmare is emphasized which includes environmental forces, developmental thrust, current and past conflicts, the state of the ego at the time, and physiological factors such as illness. A development in the child's mastery of the nightmare is traced from total helplessness in infancy, through various degrees of partial success in modifying or warding off the frightening dream, to final prevention of it in latency. This sequence parallels development in reality testing and relation to primary objects as well as an evolution in structure of the nightmare and the complexity of the psychic apparatus producing it. The nightmare is seen as a desperate creativity serving both defense and discharge. At times, it signals a developmental advance, at others, an onset of lasting symptom-formation and impaired ego functioning. Further study is necessary to determine which is happening in a particular instance.