We discuss the relationship between sleep, dreams, and memory, proposing that the content of dreams reflects aspects of memory consolidation taking place during the different stages of sleep. Although we acknowledge the likely involvement of various neuromodulators in these phenomena, we focus on the hormone cortisol, which is known to exert influence on many of the brain systems involved in memory. The concentration of cortisol escalates over the course of the night's sleep, in ways that we propose can help explain the changing nature of dreams across the sleep cycle.There is currently no convincing explanation for why we dream or what we dream about. In this article we propose an approach to dreaming that focuses on the relationship between sleep and memory. We suggest that dreams reflect a biological process of long-term memory consolidation, serving to strengthen the neural traces of recent events, to integrate these new traces with older memories and previously stored knowledge, and to maintain the stability of existing memory representations in the face of subsequent experience (Winson 1985(Winson , 2002(Winson , 2004Kali and Dayan 2004).It is generally assumed that long-term memory consolidation involves interactions among multiple brain systems, modulated by various neurotransmitters and neurohormones. We propose that the characteristics of dreams are best understood in the context of this neuromodulatory impact on the brain systems involved in memory consolidation. Although a number of neurotransmitters and neurohormones are likely involved, we focus our attention in particular on the stress hormone cortisol, which has widespread effects on memory during waking life through its impact on many of the critical brain structures implicated in memory function.Our hypothesis, briefly stated, is that variations in cortisol (and other neurotransmitters) determine the functional status of hippocampal ↔ neocortical circuits, thereby influencing the memory consolidation processes that transpire during sleep. The status of these circuits largely determines the phenomenology of dreams, providing an explanation for why we dream and of what. As a corollary, dreams can be thought of as windows onto the inner workings of our memory systems, at least those of which we can become conscious.In addition to exploring these ideas in more detail, we provide some background concerning (1) the states of sleep and the role of various neurotransmitters in switching from one sleep state to another, (2) how the characteristics of dreams vary as a function of sleep state, (3) the memory content typically associated with dreaming in different dream states, and (4) the role of sleep in the consolidation of memory.