Adverse childhood experiences can deleteriously affect future physical and mental health, increasing risk for many illnesses, including psychiatric problems, sleep disorders, and, according to the present hypothesis, idiopathic nightmares. Much like post-traumatic nightmares, which are triggered by trauma and lead to recurrent emotional dreaming about the trauma, idiopathic nightmares are hypothesized to originate in early adverse experiences that lead in later life to the expression of early memories and emotions in dream content. Accordingly, the objectives of this paper are to (1) review existing literature on sleep, dreaming and nightmares in relation to early adverse experiences, drawing upon both empirical studies of dreaming and nightmares and books and chapters by recognized nightmare experts and (2) propose a new approach to explaining nightmares that is based upon the Stress Acceleration Hypothesis of mental illness. The latter stipulates that susceptibility to mental illness is increased by adversity occurring during a developmentally sensitive window for emotional maturation—the infantile amnesia period—that ends around age 3½. Early adversity accelerates the neural and behavioral maturation of emotional systems governing the expression, learning, and extinction of fear memories and may afford short-term adaptive value. But it also engenders long-term dysfunctional consequences including an increased risk for nightmares. Two mechanisms are proposed: (1) disruption of infantile amnesia allows normally forgotten early childhood memories to influence later emotions, cognitions and behavior, including the common expression of threats in nightmares; (2) alterations of normal emotion regulation processes of both waking and sleep lead to increased fear sensitivity and less effective fear extinction. These changes influence an affect network previously hypothesized to regulate fear extinction during REM sleep, disruption of which leads to nightmares. This network consists of a fear circuit that includes amygdala, hippocampus, and medial prefrontal cortex and whose substantial overlap with the stress acceleration findings allows the latter to be incorporated into a wider, more developmentally coherent framework.