The literature on dreams of children is reviewed, including the neurobiological research on sleep and dreaming. The data from the sleep laboratory and the emphasis of many workers on the information-processing and adaptive functions of the dream are compatible with classical Freudian dream theory, according to the authors. The discovery that infants and toddlers spend an especially high percentage of their sleeping hours in the D-state or REM sleep should encourage our continued study of children's dreams in treatment settings.