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Right after you wake up from a dream, you seem to be able to remember most if not all of the details. Then, over time, these details fade and often disappear.

Is this a form of regression? Why is it harder to solidify memories of dreams?

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The original reference on this subject seems to be L.A. Strümpell, Die Natur und Entstehung der Träume (1877). You can read S. Freud comments and reference additions in The Interpretation of Dreams (1899), and especially the section "Why Dreams Are Forgotten After Waking". –  Havelock Aug 5 '14 at 13:13
In case I don't manage to find the time to dig up the reference (I have it somewhere on an external disk, no idea who the authors are): a neurotransmitter that is crucial for transforming short-term into long-term memories is inactive in the hippocampus during sleep. Interestingly, HM, a patient who couldn't achieve long-term memories due to an operation when both hippocampi were removed, described his state as constantly waking from a dream. –  Ana Aug 5 '14 at 14:29

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My suggestion would be that, as with all forms of mental imagery, short-term working memory circuits are responsible for keeping dreamt images active, i.e. in consciousness. Distraction by competing perceptual representations would cause immediate disruption of one's dreamt images; without such distraction, imagery in short-term memory typically starts to rapidly fade after about 8 seconds, unless it's highly relevant to one's immediate situation on waking, and hence promptly acted on.

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Welcome to cogsci.SE! Citations and links to back up specific claims and provide the asker with further reading will make your answer more useful. –  Krysta Sep 8 '14 at 12:24

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