Daydreams and night dreams are similar in that both share the wish fulfillment aspect of dreaming. Even though the difference between day and night dreams is obvious—daydreams happen when a person is awake (conscious) and night dreams happen when a person is asleep (unconscious)—the boundary between day and night dreams becomes blurred when the ego has been severely compromised. The focus of this paper is on the analysis of daydreaming and its relationship to the ego. As in the analysis of nocturnal dreams, analysis of daydreams provides another opportunity for discovery of repressed material. Analysis of daydream material also provides an opportunity to assess the development of a patient's ego. When development of the ego has been severely compromised, daydreaming may become a mechanism of defense. A literature review is presented, followed by discussion of daydreaming and the ego. Case examples illustrate major points in the discussion.