Books where everything turns out to just be a dream (apparently) or other people think it is even if the main character knows it wasn’t. Most of these are fantasy.

Fantasy

Alice’s Adventures in Wonderland (1865)

A young girl falls down a rabbit hole and finds herself in a strange land where nothing works like it’s supposed to.  By Lewis Carroll.

The Seventh Princess (1983)

A girl falls asleep on her school bus and has a fantastic dream, only it turns out to be more than just a dream.  Jennifer learns that she has been adopted by a king only to be used as tribute to an evil enchantress.  She struggles to find the key to breaking the enchantress’s spells and saving not only herself but the six princesses who went before her.  By Nick Sullivan.

The Wonderful Wizard of Oz (1900)

A young farm girl is carried off to a magical land by a tornado.  This book is public domain and is available on Project Gutenberg.  By L. Frank Baum.

Picture Books

In the Night Kitchen (1970)

A boy has a strange dream in which he must fly an airplane made of dough to retrieve milk for the cooks in the night kitchen.

Moonflute (1980, 1986)

A little girl is having trouble sleeping when the moon gives her a magical flute. By Audrey Wood, illustrated by Don Wood.

The Nutcracker (1816, 1987)

A young girl receives a magical nutcracker for Christmas and learns how to break the spell that has changed him from a human prince. By E.T.A. Hoffmann, retold by Anthea Bell.