Dreamtime was the name given to a mysterious, unexplained and nightmarish realm. Ratchet visited this strange location while he was having his DNA extracted by the Technomites at Medical Outpost Omega.
Despite apparently being a dream, physical damage taken here and items obtained here were capable of being brought back into the real world.
The dream began with several Qwark clones and Skrunch dressed up as a nurse in medical apparel preparing to operate (or experiment) on Ratchet, with one Qwark ominously asking for a bigger scalpel. One of the Qwark clones tried to kill Ratchet with a chainsaw. Ratchet released himself and fled from the apparent danger, escaping through the door which suddenly led him to a small beach looking exactly like Pokitaru. Suddenly, another door opened in thin air, where a sinister, red-eyed version of Clank, possibly Klunk, beckoned, trying to comfort Ratchet. However, as soon as Ratchet stepped towards the door, it vanished.
Ratchet was then forced to explore the mysterious realm, which was filled with visions and memories from Ratchet's past adventures (such as visions of characters like Darla Gratch, The Plumber, Nefarious and Drek). There were also structures from past games, such as Ratchet's Garage and Clank's Apartment, both of which had mirrors which would spawn out enemies if Ratchet got too close. After facing several groups of Psycho Qwarks and Needle Bats, he eventually confronted a nightmarish version of Giant Clank. Ratchet did not fight him though, as his weapons were somehow turned into butterflies. He had to avoid his attacks for a certain amount of time, and after that, "Giant Clank" would turn into many butterflies and disappear. Then two doors appeared; one with the evil Clank beckoning, and one with the real Clank. Ratchet comforted the real Clank, who was upset for not realizing there was something odd about Luna, and Clank pulled him through the door, essentially bringing him back to the real world.
Ratchet could return to Dreamtime by heading to an operation table in a certain planet.
- Unlike all the other levels, the view with the first and third-person camera here was limited, as there was only a distorted camera effect on the screen. This meant that there was only an oval as the view for the player, and that black was covering the remaining areas of the screen (this could be evidenced if one paused the game while in this level).
- If you had the big headed enemies cheat activated, the Plumber's head would also be big.
- Ratchet & Clank: Size Matters (first appearance)