Daydream Dragons are the hosts of daydreams and fantasies. They spend the majority of their time sitting on clouds, dropping daydreams down into the minds of people passing by. Humans who live near Daydream Dragons must be especially careful not to let their thoughts wander, or they could end up spending hours or even days in a trance-like waking dream state.

Dragons are highly-intelligent reptilian creatures that—from a human perspective, at least—appear to live forever. Many different varieties of dragon exist, each with their own unique qualities, habitats, and behavior. Adolescence in dragons is usually marked by the growth of a hatchling’s wings, although not all breeds of dragons grow wings and some breeds have other traits that indicate the beginning of maturation. In Galsreim, dragons and humans coexist peacefully.

Clouds of Nightmare is named so because of the fact that his fellow dragon brothers and sisters had nightmares upon his hatching, and they thought that it was caused by Clouds of Nightmare. It turned out to be coincidence, but they seem to not sleep whenever he's around. Most of the time, Clouds of Nightmare sits on his cloud and daydreams, not bothering anyone.