The episode's teleplay was written by David Greenwalt, with a story by Joss Whedon, and directed by Bruce Seth Green.
While Xander comes to school in his underwear and Giles is unable to read, Buffy must unravel the mystery before reality folds completely into the world of nightmares.
The next day, as the Master explains to Collin, the Anointed One, how wonderful he finds fear, Buffy is nervous about being picked up by her father after school, and her mother calms her down.
Cordelia's hair becomes a disheveled, spiky mess, her designer clothes become horribly drab and nerdy, and she is physically forced to join the school chess club.
Buffy's father shows up and calmly tells her that she is at fault for her parents' divorce, because she is such a difficult child and he can't stand being around her.
Nightmares plague everyone and Buffy learns Billy has experienced some sort of punishment for poor baseball skills.
They evade the scary man and find themselves in a graveyard where The Master confronts Buffy, and buries her alive.
The episode ends when Buffy and her father leave for their weekend together, the previous confrontation just an unreal nightmare.
Sarah Michelle Gellar has a similar phobia as her character, which made filming this episode specially difficult for her.
"[3] In "Once More, With Feeling," Willow sings, "I've got a theory; some kid is dreaming and we're all stuck inside his wacky Broadway nightmare.
Some of it is fine but uninspired... but at its best, 'Nightmares' locks in on the specific yet universal adolescent fears that makes Buffy such a classic.
"[6] Billie Doux gave it 3 out of 4 stakes and called it "a terrific story idea... executed beautifully.
He praised the concept but felt that it was a "mild disappointment" due to underwhelming performances by the cast.
[11] Rolling Stone ranked "Nightmares" at #60 on their "Every Episode Ranked From Worst to Best" list, calling it "whacky and full of the campy horror Buffy was always capable of delivering" and describing Buffy’s nightmares as "feelings of inadequacy, feelings of being the reason for her parent’s separation," adding that it was "devastating to watch.