Dreams create new stories out of nothing. Although dreams contain themes, concerns, dream figures, objects, etc. that correspond closely to waking life, these are only story elements. The story itself weaves these mnemonic items together in a manner far more novel than a simple assemblage or collage, producing an experience having a life-like timeframe and life-like (if often bizarre and impossible) causality (Pace-Schott, 2007; Hobson, 2009). It is as if one is immersed in another “reality” entirely of one’s own non-volitional, making (see Rechtschaffen, 1978). Given this phenomenology, it’s not difficult to see why some indigenous animist societies believe dreams represent a separate world parallel with waking life (Nielsen, 1991). But neuroscience offers some other explanations. Recent speculations have focused on the brain’s “default network” as a possible neural substrate of dreaming (Pace-Schott, 2007, 2011a,b; Nir and Tononi, 2010; Wamsley and Stickgold, 2010; Domhoff, 2011). The default network consists of regions that, in the absence of exteroceptive attention or narrowly focused mental effort, support self-directed concerns, immersion in one’s inner life (e.g., daydreaming) or imagining the inner life of others (Theory of Mind) (Buckner et al., 2008; Andrews-Hanna, 2012; Buckner, 2012). Most importantly for the current topic, the default network also simulates future scenarios and re-creates past ones drawing upon material in episodic, autobiographical, and semantic memory (Schacter et al., 2007; Schacter, 2012). Here I will suggest that such constructive activities of the brain represent a “hardwired” tendency to represent reality in the form of narrative—a “story-telling” instinct or module. The default network was originally identified using positron emission tomography (PET) as those regions showing task-induced deactivation (Gusnard et al., 2001; Raichle et al., 2001). Subsequently, it was discovered that temporal synchrony of low frequency (0.01–0.1 Hz) spontaneous fluctuations of the blood-oxygen dependent (BOLD) signal of fMRI identifies both anatomical and functional connectivity among regions of the default network (Fox and Raichle, 2007; Greicius et al., 2008). This network consists of (1) medial parietal areas: posterior cingulate (pCC) and retrosplenial (Rsp) cortices; (2) posterior-lateral areas: inferior parietal lobule (IPL), temporoparietal junction (TPJ), lateral temporal cortex (LTC), temporal poles (TP); (3) medial temporal regions: hippocampal formation (HF), parahippocampal cortex (PHC); and (4) medial prefrontal areas: ventromedial (vmPFC) and dorsomedial (dmPFC) prefrontal cortices (Buckner et al., 2008; Spreng et al., 2009; Andrews-Hanna, 2012). Resting state functional connectivity analyses of BOLD oscillations in waking have identified two default-network subsystems each of which fluctuates synchronously with central nodes in the pCC and anterior medial PFC (amPFC) but not with each other (Buckner et al., 2008; Andrews-Hanna et al., 2010; AndrewsHanna, 2012). The dorsomedial prefrontal subsystem includes the dmPFC, LTC, TPJ, and TP whereas the medial temporal lobe subsystem includes the HF, PHC, Rsp, IPL, and vmPFC. The dorsomedial prefrontal subsystem selectively activates during experimental tasks involving reflection on one’s own mental state and that of others as well as other forms of social cognition (Andrews-Hanna et al., 2010; Mar, 2011; Andrews-Hanna, 2012). In contrast, the medial temporal lobe subsystem is selectively activated by retrieval of episodic and autobiographical memories as well as by imagination of future scenarios and concerns (Schacter et al., 2007; AndrewsHanna et al., 2010; Andrews-Hanna, 2012; Schacter, 2012). The central nodes activate along with most tasks that recruit one or the other subsystem (Andrews-Hanna, 2012). Synchrony of BOLD fluctuations among components of the default network persists into light (Drummond et al., 2005; Horovitz et al., 2008; Larson-Prior et al., 2009) and Stage 2 (Laufs et al., 2007) NREM sleep. However, in slowwave sleep (SWS), frontal regions may uncouple from the rest of the default network (Horovitz et al., 2009; Samann et al., 2011, but see Koike et al., 2011). In the one study examining REM, unlike both waking and NREM, there appeared a lack of connectivity between the dorsomedial prefrontal subsystem and the posterior central node of the default network in the pCC (Koike et al., 2011). Koike et al. speculate that this disconnection contributes to the illogic and bizarreness of dream cognition, as has also been suggested for loss of antero-posterior EEG synchrony in the fast, gamma (>30 Hz) frequencies during REM (Corsi-Cabrera et al., 2003, 2008). Earlier PET and fMRI activational studies of sleep also showed distinctly different activity in medial limbic versus lateral association cortex during REM sleep. After sleep onset during NREM, widespread cortical and subcortical areas become less active (Braun et al., 1997; Maquet et al., 1997; Nofzinger et al., 2002; Kaufmann et al., 2006). However, with the onset of REM sleep, midline limbic regions of the frontal cortex and subcortex reactivate to levels equaling and sometimes exceeding those of waking, whereas lateral and posterior-medial cortical areas remain in a NREM-like deactivated state (Maquet et al., 1996, 2005; Braun et al., 1997,