Introduction: Although REM sleep plays an important role in neural maturation, developmental aspects of dream research are relatively neglected compared to studies focusing on adults. Adult research found that REM sleep and dreams take certain roles in emotional adaptation, including the processing of emotional events, consolidation of emotional memories and the downregulation of reactions to dysphoric stimuli. These findings, however, are rarely discussed in a developmental perspective. Aims: We aim to test the neurocognitive dream theory developed by Nielsen and Levine (2007) by investigating the associations among abilities of waking emotional processing, behavioral manifestations of emotional problems and the emotional aspects of dreaming in children. Methods: We analyzed 349 dream reports of 40 children between the ages of 4 to 8 years. Dream emotions, emotional dream quality and the dreams’ effect on daytime’s mood were self-reported by the children. Wakeful emotional processing is measured by the Emotional Stroop Test for children, and emotional-behavioral problems were assessed by the parent version of the Strength and Difficulties Questionnaire (SDQ). Results: Results show that negative dream quality and the dreams’ effect on daytime mood are associated with negative emotional adaptation measured by the SDQ (tau = .25, p = .031, tau = .24, p = .041 respectively). Children with more emotional problems reported more dreams (tau = .32, p = .004). Interestingly, we could not find relationship between dream emotions and waking emotional development measures. Conclusion: Results support psychological models of dreaming assuming a role of dreams in emotional regulation and provide partial support for the plausibility of Levin and Nielsen’s neurocognitive theory in a developmental context. Further studies on emotional development and dreaming are needed to gain more insight in the generalizability of the connection between emotional processing during wakeful functioning and REM sleep.