The Dream potion is used in the Dream Mentor quest. The Oneiromancer tells Cyrisus and the player that the potion will send them to Dreamland. The potion puts the player in Cyrisus's dream and binds the two subconsciousnesses together.
With the two minds melded as one, the Oneiromancer says both characters need each other to survive. If one dies, both die, "just as if you were killed by a monster in the wild", the Oneiromancer cautions.
To make the potion, fill an empty Dream vial with water to create a Dream vial (water). Next, add a Goutweed to create a Dream vial (herb). Finally add Ground astral rune to make to make the Dream potion.
During the quest, you give the Dream potion to Cyrisus, who puts it on the brazier used in the Lunar Diplomacy quest. You then light the burner and are transported to Cyrisus's dream, where you have to conquer his fear of combat by fighting four monsters: The Inadequacy, The Everlasting, The Untouchable and The Illusive.