The Realm of Dreams is a dimension where dreams and nightmares roam. It is where the collective imagination of all the creatures in the universe come together to create beautiful wonders and terrible nightmares. While not exactly located in Skylands, it lies within the minds of the residents. The Sleep Dragon is the supposed ruler of the dream realm.
- The Air Doom Raider, Dreamcatcher, escaped from this realm.
- The Realm of Dreams might be a throwback to the Dream Weavers from the original Spyro the Dragon game.