He is a powerful dream demon who uses his ability to manipulate dreams to attack the innocent. Nightmare first uses his powers to put all of New York into a deep sleep, making the population of New York vulnerable to his attacks. Spider-Man, Luke Cage, Iron Fist, Nova and White Tiger go to the Dream Dimension (the place where dreams take place, the place everyone goes when they dream after falling asleep) with the help of Doctor Strange to confront Nightmare. Nightmare uses his powers to create nightmares for the heroes, but Spider-Man's heroic willpower allows everyone to leave the Dream Dimension with a captured Nightmare. Since Nightmare has no powers in the waking world, Doctor Strange casts a spell that imprisons Nightmare in a chest.
Later, Nightmare escapes from the chest and gives Spider-Man a dream that shows a world without Spider-Man, the point being to demoralize him by convincing him that the world is better off without him. However, Spider-Man remains true to his convictions, wakes up, and defeats Nightmare in the waking world.