The game follows Sonic, Tails, Knuckles, Amy Rose, Rouge and Cream traversing across Reverie Haven which is corrupted by Doctor Eggman—using a mysterious device protected by a guardian named Ariem—to stop him.

The game initially features six playable characters; Sonic, Amy Rose, Tails, Cream the Rabbit, Knuckles the Echidna and Rouge the Bat.

Additional items can unlock bonus content such as collectible statues, jukebox tracks, and special powers that can be equipped at the start of a level.

[2] Doctor Eggman discovers an ancient relic called the Reverie, an object with dream-controlling powers that allows the pure of heart to bring their dreams into reality.

Sonic, Tails, Knuckles, Amy Rose and Rouge arrive at the scene to try and rescue Cream and Cheese, to which the guardian also sends everyone to sleep and as a result enter Eggman's dreams.

After traveling through Scrambled Shores, Dream Factory, and Nightmare Maze, a monster known as the Guardian Hunter ambushes Ariem in an attempt to capture her for Eggman.

The heroes then pass through Ego City, a dystopian imperial capital intended to be brought into the real world, before reaching the Dream Core at the center of the Reverie.

The wounded Ariem, unable to directly reach the Dream Core to banish Eggman, transforms into a small orb which the heroes intend to carry.

She is immediately restored to full health, banishes Eggman, and activates the Dormancy Protocol, which will shut the Reverie's dream-manipulation down for a millennium.

Sega confirmed that Dream Team would be getting three major updates in a similar vein to Sonic Frontiers (2022), with the first one released on February 14, 2024, adding time trials and overhauling the boss fights.

A surprise fourth update, released on September 14th, 2024, introduced unlockable powers, as well as new jukebox tracks and special "Fractured Dreams" levels in Tails' Challenges.