Short answer
Dream Dust is an alchemy brew: any one or two ingredients whose runes add up to exactly 1 green and 1 blue make it, using 1 Alchemy Flask. Peat or Ash alone already carry that pair, so one ingredient is enough. The Alchemist also sells it from the start. You need it for the main quest Sweet Dreams, Fancy Incense, Crop Boosting Fertilizer I and the Summon Fairy recipe.

The Astrologer's Tower
View full-size image ↗Official promotional screenshot · © Lazy Bear Games / tinyBuild · Official media kit · Material credits
The rune rule
Target: 1 green + 1 blue, no red. The match has to be exact — one rune too many in any colour brews something else or nothing.
23 ingredient combinations work, and Laboratory I (two slots) is enough.
An ingredient must have its runes uncovered at the Study Table before the laboratory accepts it. Alchemic Powders are known from the start.
Easy mixes
Peat on its own — 1 green, 1 blue. It is free from the Compost Pile.
Ash on its own — also 1 green, 1 blue.
Alchemic Powder (1 green) + Alchemic Powder (1 blue), or any 1-green item (Berry, Leaf, Stick, Water) plus any 1-blue item (Blueberry, Blood, Seed oil) — for example Leaf + Blueberry or Berry + Seed oil.

The home garden from the official media kit, where Peat and green-rune ingredients come from. Not a laboratory screen.
View full-size image ↗Official promotional screenshot · © Lazy Bear Games / tinyBuild · Official media kit · Material credits
Buying and selling
Base price 1 silver, stacks to 20.
The Alchemist sells it from the start (stock 5 / 10 / 10 by trader level) and buys it back for about 75 bronze, with up to +5 or +10 Likes a week depending on his level.
Studying one pays 50 blue tech points for 5 Science.
What Dream Dust is for
Sweet Dreams (main story): carry 1 Dream Dust to Albert, the Plague Doctor, in the Abandoned Tower. He rewards you with your first 2 worker zombies.
Fancy Incense: 1 Melted Fat + 1 Fragrance + 1 Dream Dust at the Formulation Bench, for church quality.
Crop Boosting Fertilizer I: 2 Peat + 1 Dream Dust at the Formulation Bench.
Summon Fairy at the Kitchen Table also takes 1.
Sources
- communitywikily.gg — Dream Dust
- communitywikily.gg — Alchemy
- communitywikily.gg — Sweet Dreams
Related pages
Official screenshot · © Lazy Bear Games / tinyBuildAutomationGraveyard Keeper 2 Alchemy Guide
Official screenshot · © Lazy Bear Games / tinyBuildCraftingGraveyard Keeper 2 Incense
Official screenshot · © Lazy Bear Games / tinyBuildCraftingGraveyard Keeper 2 Peat
Official screenshot · © Lazy Bear Games / tinyBuildAutomationGraveyard Keeper 2 Fertilizer
Official screenshot · © Lazy Bear Games / tinyBuildCraftingGraveyard Keeper 2 Paint