The experience of skilled action occurs in dreams if we take dream reports at face value. However, what these reports indicate requires nuanced analysis. It is uncertain what it means to perform any action in a dream whatsoever. If skilled actions do occur in dreams, this has important implications for both theory of action and theory of dreaming. Here, it is argued that since some dreams generate a convincing, hallucinated world where we have virtual bodies that interact with virtual objects, there is a sense in which we can perform virtual actions. Further, we can also perform skilfully, although not all apparent skilful performance is as it seems. Since the dream world is generated by the dreamer’s own mind, it can be difficult to determine whether the dream world simply allows goals to be achieved without the abilities that would be required in a similar waking scenario. Because of this, individual dream reports alone are insufficient to determine what skills are demonstrated in a particular dream. However, taken with evidence from REM sleep behaviour disorder, incompetent dreams, lucid dreams and motor-skill practise, it is likely that skilled virtual dream performance at times involves both opportunity for virtual behaviour and the display of competence. Evidence from cognitive science suggests that dreamers can also lose competence through forgetting and other cognitive incapacities but, more surprisingly, it is possible to gain abilities in a robust sense, consistent with the idea that some dreams, at least, are virtual realities rather than imagination.