Although the role and importance of the interpretation of dreams has been de-emphasized in clinical discussions for the past several decades, new models of dream physiology suggest the central role and importance of dreams in the regulation of behavior. According to a body of current research, dreams potentiate new pathways of problem solving. A review of the neurophysiological literature pertinent to direct interpretation suggests dreams are sustained by midbrain anatomical networks with feed-back and feed-forward links to the cortex. The anatomical networks are termed the endogenous-intraorganismic system, the exogenous-transactional system, and the relational system that correspond to subjective, objective, and relational dreams in direct interpretation. Just as ordinary thought is the province of the dominant or left hemisphere, dreams are the province of the nondominant or right hemisphere. During REM states new pathways of problem solving are laid down by the nondominant hemisphere. In the awake state, thought and behavior about content that relates to dream material follow these pathways. The new neuropsychology of dreams reaffirms the central role of dreams in the organization of affect, emotion, intention, and general adaptation.