Severe dissociation is trauma‐related, but a range of dissociative experiences are also prevalent in clinical populations that are not necessarily trauma‐based (e.g., depression, anxiety disorders, and obsessive–compulsive disorders). These remain poorly understood as the dominant etiological model for dissociation relies on trauma. Importantly, dissociation in such samples predicts poor prognosis and high drop‐out rates. We set out to better understand the aetiology of dissociative experiences in a mixed clinical (anxiety and depression) and community sample by exploring between‐ and within‐subjects effects of two domains: psychological distress or negative affectivity (operationalized as anxiety and depression symptoms), and poor sleep quality, including disturbed dreaming. The idea that negative affectivity triggers dissociation (Distress Model) is inspired by the trauma model. The idea that poor sleep and unusual dreaming underlie dissociation (Sleep Model) has been suggested as a competing theory. We examined both models by exploring which domains oscillate alongside dissociative experiences. N = 98 adults, half of them diagnosed with depression and anxiety and half community controls, underwent a structured clinical interview and completed questionnaires monthly for 6 months. Support was found for both models in that each domain had a unique explanatory contribution. Distress evinced consistent effects that could not be explained by sleep or dreaming, both between individuals and across time. Oscillations in dissociation across months, when taking psychological distress into account, were better explained by unusual dreaming than traditional sleep quality measures. These findings cannot be generalized to highly‐traumatized samples. A complex, integrated etiological model for dissociative experiences is warranted.