Thinking is known to be state dependent but a systematic study of how thinking in dreams differs from thinking while awake has not been done. The study consisted of analyzing the dream reports of 26 subjects who, in addition to providing dream reports also provided answers to questions about their thinking within the dream. Our hypothesis was that thinking in dreams is not monolithic but has two distinct components, one that is similar to wake-state cognition, and another that is fundamentally different. We found that cognition within a dream scenario was similar to that of wake-state cognition, but that thinking about the scenario itself was deficient and very different than wake-state thinking.