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.

A third-generation pedigree of Daydream Dragons, Yerazig was stolen by humans as an egg. When she hatched, she found fun in playing with the humans' dreams and soon became obsessed with the past time. She made them believe she was a dragon worth worshiping and continues to do so from her cave home that overlooks their village. She welcomes other Daydream Dragons to "her" lair, with the mindset that dragons must be purebred. She looks down upon those who have other breeds in their gene pool, though she is normally very passive.