Nightmare disorder (ND) is characterized by dreams with strong negative emotions occurring during rapid eye movement (REM) sleep. ND is mainly treated by imagery rehearsal therapy (IRT), where the patients are asked to change the negative story line of their nightmare to a more positive one. We here used targeted memory reactivation (TMR) during REM sleep to strengthen IRT-related memories and accelerate remission of ND. Thirty-six patients with ND were asked to perform an initial IRT session and, while they generated a positive outcome of their nightmare, half of the patients were exposed to a sound (TMR group), while no such pairing took place for the other half (control group). During the next 2 weeks, all patients performed IRT every evening at home and were exposed to the sound during REM sleep with a wireless headband, which automatically detected sleep stages. The frequency of nightmares per week at 2 weeks was used as the primary outcome measure. We found that the TMR group had less frequent nightmares and more positive dream emotions than the control group after 2 weeks of IRT and a sustained decrease of nightmares after 3 months. By demonstrating the effectiveness of TMR during sleep to potentiate therapy, these results have clinical implications for the management of ND, with relevance to other psychiatric disorders too. Additionally, these findings show that TMR applied during REM sleep can modulate emotions in dreams.