Background: A resurgence of neurobiological and clinical research is currently under-way into the therapeutic potential of serotonergic or ‘classical’ psychedelics, such as the prototypical psychedelic drug lysergic acid diethylamide (LSD), psilocybin (4-phosphoryloxy-N,N-dimethyltryptamine), and ayahuasca – a betacarboline- and dimethyltryptamine (DMT)-containing Amazonian beverage. The aim of this review is to introduce readers to the similarities and dissimilarities between psychedelic states and night dreams, and to draw conclusions related to therapeutic applications of psychedelics in psychiatry. Methods: Research literature related to psychedelics and dreaming is reviewed, and these two states of consciousness are systematically compared. Relevant conclusions with regard to psychedelic-assisted therapy will be provided. Results: Common features between psychedelic states and night dreams include perception, mental imagery, emotion activation, fear memory extinction, and sense of self and body. Differences between these two states are related to differential perceptual input from the environment, clarity of consciousness and meta-cognitive abilities. Therefore, psychedelic states are closest to lucid dreaming which is characterized by a mixed state of dreaming and waking consciousness. Conclusion: The broad overlap between dreaming and psychedelic states supports the notion that psychedelics acutely induce dreamlike subjective experiences which may have long-term beneficial effects on psychosocial functioning and well-being. Future clinical studies should examine howtherapeutic outcome is related to the acute dreamlike effects of psychedelics.