SummaryWe collected measures of sleep architecture and nightmares from participants (N = 61) wearing the DREEM 3 headband across 2 weeks of data collection to test the hypothesis that there are bidirectional links between insomnia (measured as sleep disturbance) and nightmare events. Nightmares were predicted by increased sleep disturbance the night before the nightmare, but not on the same night or 2 nights before. We also found that nightmare occurrences did not predict increased sleep disturbance on the same night or the following 2 nights, rather nightmares predicted increased sleep disturbance at the between‐subjects level only. We suggest that nightmares are associated with an N3 sleep rebound on the night of the nightmare following a night of sleep disturbance.