To dream that you are dreaming or daydreaming signifies your emotional state. You are excessively worried and fearful about a situation or circumstance that you are going through. Dreaming that you are dreaming also serves as a layer of protection from what you are feeling. The dream within a dream allows you to experience certain difficult feelings that may otherwise be too painful to confront if you were directly dreaming the scenario.
To dream that you are dreaming represents a realization that something in your life wasn't as serious as you thought it was.
Positively, this reflects worries that are overblown. You may have been afraid or concerned about something and a life situation proved that you were overreacting.
Negatively, a dream within a dream can point to disappointments, letdowns, or something you thought was wonderful not turning out the way you thought it would.