A government funded project looks into using psychics to enter people's dreams, with some mechanical help. When a subject dies in his sleep from a heart attack Alex Gardner becomes suspicious that another of the psychics is killing people in the dreams somehow and that is causing them to die in real life. He must find a way to stop the abuse of the power to enter dreams.
Alex Gardner (Dennis Quaid) is a psychic who has been using his talents solely for personal gain, which lately consists mainly of gambling and womanizing. When he was 19 years old, Alex had been the prime subject of a scientific research project documenting his psychic ability, but in the midst of the study, he disappeared. After running afoul of a local gangster/extortionist named Snead (Redmond Gleeson), Gardner evades two of Snead’s thugs by allowing himself to be taken by two men, Finch (Peter Jason) and Babcock (Chris Mulkey), who identify themselves as being from an academic institution.
At the institution, Alex is reunited with his former mentor Dr. Paul Novotny (Max von Sydow) who is now involved in government-funded psychic research. Novotny, aided by fellow scientist Dr. Jane DeVries (Kate Capshaw), has developed a technique that allows psychics to voluntarily link with the minds of others by projecting themselves into the subconscious during REM sleep (in other words, while they are dreaming). Novotny equates the original idea for the dreamscape project to the practice of the Senoi natives of Malaysia, who believe the dream world is just as real as reality.
The project was intended for clinical use to diagnose and treat sleep disorders, particularly nightmares, but it has been hijacked by Bob Blair (Christopher Plummer), a powerful government agent. Novotny convinces Alex to join the program in order to investigate Blair’s intentions. Alex gains experience with the technique by helping a man worried about his wife’s infidelity, and by treating a young boy named Buddy (Cory Yothers) who is plagued with nightmares so terrible that a previous psychic lost his sanity trying to help him. Buddy’s nightmare involves a large sinister “snakeman”…