The unique approach to dreams of Swiss psychoanalyst Fritz Morgenthaler is presented and discussed. Although rarely discussed in the English-speaking psychoanalytic world, this approach is very alive in German-speaking countries. Focusing on the distinction between the remembered hallucinatory experience of dreamers and the event of telling dreams within psychoanalytic sessions, Morgenthaler made two major innovations: first, he proposed a new understanding and handling of associations to dreams, and second, he offered what he called dream diagnostics as an instrument with which to integrate both resistance and transference into clinical work with dreams.