Magical Realism as a critical strategy may be located in postmodernism as it problematizes the 'real' and its 'representation'. Mingling realistic portrayals of ordinary events and characters with elements of fantasy and myth, it creates a rich, often disquieting world that is once familiar and dreamlike. The characters in magical realist works unconditionally accept rather than question the 'logic' of the magical element. The term itself was initially used rather pejoratively to undermine non-Western, alternative modes of representation. Having its origin in Latin American literature particularly in the works of Gabriel García Márquez and Jorge Luis Borges, Magical Realism has been used as a critique of both Western modes of narration and their constructions of reality with regard to the 'other', which are at once essentialist and hegemonic. Derek Walcott, the Caribbean writer, uses magical realism to great effect in his play Dream on Monkey Mountain. The paper titled "Framing the colonial nightmare through a Dream: Magical Realism as a postcolonial narrative mode in Derek Walcott's Dream on Monkey Mountain" will argue that Derek Walcott uses this mode of perceiving reality and of representing it as an effective postcolonial strategy to radically examine the devious stratagems of colonialism and their material effects. Makak, the central character in the play, dreams of an alternative reality, which serves as an antidote to the problems created by 'constructs' and their tangible adverse consequences. The paper will argue that derek Walcott frames coloniality, a concept which is a nexus between the practices and legacies of European colonialism in social structures and forms of knowledge, using magical realism to foreground the disconcerting realities caused by colonial control of a people. The term dream itself has a lot of resonances in the play. The quality of dreaming defines each character in the play and it is in this series of dreams, the paper will argue, that Makak's dream is located. Makak's dream, which weaves elements of myths and legends, will showcase the true and ugly face of colonialism. The dream, in itself, is not a solution, but a means of acquiring clarity in stating the problem. Derek Walcott, who is caught in the in-betweenness of two cultures, then, states the problem by portraying Makak's yearning for an apparently irrecoverable African past.