Every night, all human dreams are played out in Nightopia and Nightmare, the two parts of the dream world. In Nightopia, distinct aspects of dreamers' personalities are represented by luminous colored spheres known as "Ideya". However, the evil ruler of Nightmare, Wizeman the Wicked, is stealing this dream energy from sleeping visitors, in order to gather power to take control of Nightopia and eventually the real world. To achieve this, he creates numerous beings called "Nightmaren", including two acrobatic jester-like, flight-capable beings called Nights and Reala. However, Nights rebels against Wizeman's plans, and is punished by being imprisoned inside an Ideya palace, a gazebo-like container for dreamers' Ideya.

One day, Elliot Edwards and Claris Sinclair, two children from the city of Twin Seeds, go through failures. Elliot likes to play basketball, but is challenged by kids from another grade and loses. Claris wants to sing in a play but is overcome by stage-fright in front of the judges. That night, they both suffer nightmares that replay the events. They escape into Nightopia and find that they both possess the rare Red Ideya of Courage, the only type Wizeman cannot steal. They release Nights, who tells them about dreams, and Wizeman and his plans, and the three begin a journey to stop Wizeman and restore peace to Nightopia.