The link between dreams and creativity has been a topic of intense speculation. Recent scientific findings suggest that sleep onset (known as N1) may be an ideal brain state for creative ideation. However, the specific link between N1 dream content and creativity has remained unclear. To investigate the contribution of N1 dream content to creative performance, we administered targeted dream incubation (a protocol that presents auditory cues at sleep onset to introduce specific themes into dreams) and collected dream reports to measure incorporation of the selected theme into dream content. We then assessed creative performance using a set of three theme-related creativity tasks. Our findings show enhanced creative performance and greater semantic distance in task responses following a period of N1 sleep as compared to wake, corroborating recent work identifying N1 as a creative sweet spot and offering novel evidence for N1 enabling a cognitive state with greater associative divergence. We further demonstrate that successful N1 dream incubation enhances creative performance more than N1 sleep alone. To our knowledge, this is the first controlled experiment investigating a direct role of incubating dream content in the enhancement of creative performance.