System-specific brain responses—time-locked to rapid eye movements (REMs) in sleep—are characteristically widespread, with robust and clear activation in the primary visual cortex and other structures involved in multisensory integration. This pattern suggests that REMs underwrite hierarchical processing of visual information in a time-locked manner, where REMs index the generation and scanning of virtual-world models, through multisensory integration in dreaming—as in awake states. Default mode network (DMN) activity increases during rest and reduces during various tasks including visual perception. The implicit anticorrelation between the DMN and task-positive network (TPN)—that persists in REM sleep—prompted us to focus on DMN responses to temporally-precise REM events. We timed REMs during sleep from the video recordings and quantified the neural correlates of REMs—using functional MRI (fMRI)—in 24 independent studies of 11 healthy participants. A reanalysis of these data revealed that the cortical areas exempt from widespread REM-locked brain activation were restricted to the DMN. Furthermore, our analysis revealed a modest temporally-precise REM-locked decrease—phasic deactivation—in key DMN nodes, in a subset of independent studies. These results are consistent with hierarchical predictive coding; namely, permissive deactivation of DMN at the top of the hierarchy (leading to the widespread cortical activation at lower levels; especially the primary visual cortex). Additional findings indicate REM-locked cerebral vasodilation and suggest putative mechanisms for dream forgetting.