Why did people across the world and throughout history believe that dreams can foretell what will occur in the future? In this paper, I attempt to answer this question within a cultural evolutionary framework by emphasizing the cognitive aspect of dream interpretation; namely, the fact that dreams were often viewed as significant and interpretable has to do with various psychological and social factors that influence how people obtain and process information regarding the validity of dream interpretation as a technique. Through a comprehensive analysis of a large dataset of dream occurrences in the official Chinese historical records, I argue that the ubiquity and persistence of dream interpretation have both a theoretical component (supernatural worldview) and an empirical component (predictively accurate dream cases) which is particularly vulnerable to transmission errors and biases. The overwhelmingly successful records of dream prediction in transmitted texts, I suggest, is largely due to the fabrication and retrospective inference of past dreams, as well as the under-reporting of predictive failures. These “positive data” then reinforce individuals’ confidence in the predictive power of dreams. I finally show a potential decline of the popularity of dream interpretation in traditional China and offer a few suggestive explanations drawing on the unique characteristics of oneiromancy compared to other divination techniques.