dream (v.) Look up dream at Dictionary.com
c. 1200 in the current sense, from dream (n.). Old English verb dremen meant "rejoice; play music." Related: Dreamed; dreaming.
dream (n.) Look up dream at Dictionary.com
"sequence of sensations passing through a sleeping person's mind," mid-13c., (also as a verb), probably related to Old Norse draumr, Danish drøm, Swedish dröm, Old Saxon drom "merriment, noise," Old Frisian dram "dream," Dutch droom, Old High German troum, German traum "dream." These all are perhaps from a Proto-Germanic *draugmas "deception, illusion, phantasm" (source also of Old Saxon bidriogan, Old High German triogan, German trügen "to deceive, delude," Old Norse draugr "ghost, apparition"). Possible cognates outside Germanic are Sanskrit druh- "seek to harm, injure," Avestan druz- "lie, deceive."

Old English dream meant only "joy, mirth, noisy merriment," also "music." And much study has failed to prove that Old English dream is the source of the modern word for "sleeping vision," despite being identical in spelling. Either the meaning of the word changed dramatically or "vision" was an unrecorded secondary Old English meaning of dream, or there are two words here. OED offers this theory: "It seems as if the presence of dream 'joy, mirth, music,' had caused dream 'dream' to be avoided, at least in literature, and swefn, lit. 'sleep,' to be substituted ...."

Before it meant "sleeping vision" Old English swefn meant "sleep," as did a great many Indo-European "dream" nouns originally, such as Lithuanian sapnas, Old Church Slavonic sunu, and the Romanic words (French songe, Spanish sueño, Italian sogno all from Latin somnium. All of these (including Old English swefn) are from PIE *swep-no-, which also is the source of Greek hypnos; see somnolence. Old English also had mæting in the "sleeping vision" sense.

Dream in the sense of "ideal or aspiration" is from 1931, from earlier sense of "something of dream-like beauty or charm" (1888).