The present study compares the sleep and dreams of three groups of subjects: 1) Vietnam veterans with posttraumatic stress disorder (PTSD) and major depression, 2) veterans with depression alone, and 3) veterans with neither PTSD nor depression (i.e., normal controls). Sleep recordings indicate only one significant difference between the PTSD/depressed and depressed alone groups: sleep latency was prolonged in the depressed alone patients compared with the other two groups. The two patient groups differed from controls in the manner already reported for depressed patients (decreased REM latency, increased REM density, reduced total sleep time, reduced sleep efficiency), with some of the differences significant only at the trend level. Dreams were obtained from REM awakenings. Dream recall rate and report length did not differ between groups. Mean anxiety level in dreams was less than 1 (mild) for all three groups, with major depression patients scoring significantly higher than controls. Dreams of PTSD/depressed patients were significantly less likely to be set in the present than dreams of the other two groups.