Yumeji Fujiwara Es un estudiante de Secundaria con la capacidad de predecir los sueños o pesadillas de la gente. Recientemente, el ha tenido sueños donde es perseguido por un extraño demonio llamado John Doe. Un día, Yumeji conoce una extraña chica después de que ella cae de un árbol sobre él, ella se va a buscar su sombrero y Yumeji lo encuentra, solo para hallarse repentinamente en el mundo de su pesadilla, y ser perseguido de nuevo por John y su ejercito de gatos. Como Yumeji es acorralado, la chica de antes se presenta como Merry Nightmare, y pelea contra John. Cuando Merry intenta pedirle a John que la lleve de regreso al mundo de donde el vino, John solo se ríe de ella y se va, antes de que los dos ella y Yumeji regresen al mundo real.

Merry repentinamente colapsa, así que Yumeji la lleva a casa donde su amiga , Isana Tachibana, y su padre ayuda a cuidar de ella en el cafetería de la familia. Merry le explica a Yumeji que ella había estado cazando demonios de sueño, tratando de buscar una forma de regresar al mundo del que ella viene, solo para encontrarse con mas preguntas. Más tarde esa noche, Merry decide dejar de hacer las cosas por si sola, mientras que Yumeji afirma su decisión de ayudarla. Mientras tanto, una niña llamada Yumi con sueños de convertirse en enfermera de repente termina e un mundo de ensueño diferente con su demonio de sueño residente, Serio. Sin embargo, Serio es asesinado repentinamente lo que hace que Yumi pierda todas sus metas.

Cuando Yumeji va a buscar a Merry, el la encuentra en un parque con un niño llamado Minato Kisaragi, quien tiene problemas para hacer amigos. Después de jugar con el un rato, Yumeji decide presumir su habilidad, solo para descubrir que Minato ha estado teniendo pesadillas. El pronto termina dentro de su ensueño, donde un demonio de sueño llamado Ichima quiere impedir que Minaro haga amigos para que se pueda convertir en su recipiente. Justo en ese momento Merry llega y logra dar a Minato la confianza par decir lo que es correcto, luego Merry derrota a Ichima. Al regresar al mundo real una vez más, Minato va a hacer algunos amigos mientras Merry se va por su cuenta otra vez

El presidente del club de literatura de Yumeji, Mei Hoshino, se ha estado enviando textos con un misterioso chico llamado Chris Evergreen. Más tarde ese día, Yumeji y Mei, así como los miembros del club Takateru Akiyanagi y Saki Kirishima, llevaron consigo a Merry al karaoke, mientras Isana trata de hacerse amiga de una estudiante de transferencia llamada Chizuru Kawanami. Luego esa noche, cuando Mei llego a la cafetería supuestamente llevada por Chris, repentinamente comenzó a actuar extraño y a enviarse textos a ella misma desde otro teléfono.Yumeji se da cuenta que Mei se ha convertido en un recipiente para Chris, que en realidad es otro demonio de sueños , y la persigue, terminando en su ensueño. Cuando Chris se prepara para atacarlo, Merry llega y lo derrota. Antes de que que Chris desaparezca, Mei le pide que la mire y ella termina feliz por lo que ha visto. desde ese punto, Yumeji decide trabajar junto a Merry para ayudarla a encontrar las pesadillas, y ella comienza a trabajar a tiempo parcial en el café.

Isana se deprime al escuchar que su idolo, Yokato, anuncia su retiro del canto en la televisión. Yumeji y Merry van de compras, donde Yumeji se entera que Merry parece haber llegeado al mundo real hace unos diez años. Luego conocen una chica llamda Yui Kōnagi, a la cual Yumeji ayuda a encontrar una muñeca que ella perdió. Yui, actualmente es el recipiente voluntario de un demonio de sueños llamado Engi Threepiece, el desencadena un sueño en el cual Yumeji y Merry quedan atrapados. Engi les pregunta acerca de alguien llamado Pharos Hercules, antes de comenzar a luchar con Merry. Cuando Merry habla acerca de enviar de vuelta a Engi de donde vino, ella afirma que no hay forma de regresar para los demonios de sueños, revelando que su hermana fue asesinada cuando ella ingreso al mundo real. Cuestionando si realmente ha estado haciendo lo correcto, Merry es incapaz de seguir luchando contra Engi, provocando que Yumeji se interponga entre ellas, recibiendo un herida en el pecho

Traumatised by the attack on Yumeji, Merry unleashes a powerful aura that destroys the dream world's moon, forcing Engi to retreat. Upon returning to the real world, Yumeji doesn't have any external injuries, but when he gets home he starts feeling pain and falls unconscious. As he dreams, Yumeji once again meets John, who treats his mental injuries. Meanwhile at school, Saki brings up how many students like Yumi have been suffering from Dream Loss, in which they give up on their goals. John explains to Yumeji that its because of him that Yumeji can enter other people's daydreams, and reveals Hercules is a dream demon who tempted many others into entering the real world. He also mentions that Hercules may know something about Merry, who allegedly entered the real world without a vessel. After Yumeji's wounds heal, John warns him about a strong dream demon named Mystletainn before he wakes up to a worried Merry.

Isana's father impulsively decides to take everyone on a trip to the beach. Merry becomes concerned about what Engi had said to her, wondering if what she had been doing up until had been the wrong thing. Meanwhile, a kid who came to attend the shooting of a superhero show gets pulled into a Daydream with his Dream Demon, Delga, who is attacked and killed by another dream demon named Mystletainn, causing the boy to lose his hopes. As Merry considers leaving again, Yumeji says she'll continue to support and help her in order to prove Engi wrong.

Having picked up a sprained ankle during his trip to the beach, Yumeji gets it treated at a clinic, which just so happens to be owned by Yui's family. Meanwhile, Isana becomes concerned on what she wants to do after high school. Speaking through Yui as a vessel, Engi apologises to Yumeji for her actions and explains her situation. As Yumeji fetches Merry to go talk with them, they all find themselves in a maze-like daydream, run by the dream demon Landsborough who is under worship of Hercules.

As Isana leaves her guidance counselling session, she temporarily enters a daydream. Although Merry easily defeats Landsborough's henchmen, she is hesitant to attack him due to what Engi had told her. He then taunts Engi, saying that is he is killed, then the dreams of his vessel will disappear as well. Engi attacks Landsborough out of anger, but Yumeji stops her and Landsborough escapes with his vessel. After calming down, Engi explains what she knows about Mystletainn, who has the power to force dream demons into vessels. Meanwhile, Chizuru, a vessel herself, confronts the guidance counseller, Ijima, who is actually Mystletainn's vessel, saying he plans to target Isana who, at that time, Yumeji and Merry discover to have become a vessel.

As Yumeji becomes frustrated about Isana's situation, Chizuru, who had previously thrown away all her emotions following her parents deaths, becomes conflicted between her desire to protect Isana and her duties towards her dream demon, Leon. Yumeji goes to see Yui and Engi, asking for their help in protecting Isana's dreams. Meanwhile, Landsborough witness Pharos Hercules in action as he kills another dream demon, informing him about Engi and Merry, who Hercules sees as no threat. As Yumeji returns home, he is greeted by Chizuru who informs that Mystletainn plans to target Isana, ignoring Yumeji's question concerning whether she is an ally or not.

Yumeji and Merry take Isana to Yui and Engi so that they can meet her dream demon, Pallette, who explains how Mystletainn forced her to make Isana her vessel. Merry wants to send her back, but isn't confident enough to try so with Isana's dreams at stake. Meanwhile, Chizuru confronts Ijima, who reveals his intentions to kill Pallette, as well as questioning Yumeji's abilities, though Chizuru is too conflicted by her duties to Leon to warn Yumeji or Isana. Later that day, Ijima and Mystletainn make their attack on Isana and Pallette, also planning to lure out Chizuru and Leon, but Merry and Yumeji appear to protect them. Mystletainn overwhelms Merry whilst Yumeji's attempt to rescue Parade is thwarted by Ijima, who reveals Chizuru had done nothing to prevent the deaths of other dream demons. As Mystletainn prepares to kill both Pallette and Isana, Chizuru decides to stand in their way to protect her.

As Yumeji and the others grow concerned about Mystletainn's strength, Chizuru brings everyone into her daydream to meet Lestion, who explains that the only way to hurt Mystletainn is a special gun which uses the agony from killed dream demons and the despair from humans as ammo. As Lestion leaves to do his own thing, Engi shows her belief in human dreams due to the extraordinary nature of Merry and Yumeji. Later, Chizuru mentions that Lestion will die if he fires the gun, becoming afraid that her memories with Isana may soon be erased. After the final exams are finished, Ijima comes to the café and Engi brings everyone into her daydream in order to use her home field to her advantage, but Mystletainn kidnaps Isana and summons a large tree. Engi uses her strongest attack on Mystletainn, but she survives and deals a critical blow to her. With Merry similarly outmatched, Yumeji takes Engi's sword and charges towards Mystletainn.

As Yumeji's attack against Mystletainn fails, Lestion sacrifices himself in order to provide Chizuru with a bullet to shoot Mystletainn, shattering her own soul in the process. However, Mystletainn survives the attack and catches Merry in a Bud of Despair, causing her to face her own despair. Yumeji, however, decides not to give and uses the power of his dreams to replicate John's weapon. As Yumeji takes on Mystletainn's attacks, Yui manages to free Merry, who becomes invigorated by Yumeji's belief in her, restoring Engi's dream world and healing her injuries. As Merry and Engi launch an attack on her, Mystletainn swallows Parade, meaning killing her would mean destroying Isana's dreams. However, after encouragement from Yumeji, Merry manages to send Parade back to the dream world and defeat Mystletainn, returning everyone to the real world, with Isana perfectly fine.