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.

Traumfanger usually sits upon his cloud, watching Wtaer and Hengst race around the bog. His dreams are controlled by his emotions. He drops the dreams of winning into their heads accidentally, sometimes making them lose concentration and crash into obstacles. They all live together near the bog with Halcon, who keeps watch for intruding humans during the night, and scares them away from the only entrance to their area during the day. When Gyarados surfaces, Traumfanger takes pity on him and drops down dreams of love. He also has the talent of catching other dragons' dreams.