The poem is the longest in the whole cycle, with eight strophes of four lines. It is about a fairy tale, where everything is beautiful. But at the moment you awake, it is obvious that it didn't exist. There is an obvious parallel with poem 14, but the description is much more abstract.
The song is in E major, i.e. directly related with the B major of song 14. Also the song is much longer than the songs before. Despite the eight strophes in the poem, the musical structure is not strophic. It consists of three themes. The first is m. 1-8, repeated in m. 8-16. The last chord in m. 14 does not anticipate the first chord in m. 15, different from the chord in m. 6. The voice has a different line than the piano, probably because it would have been rather high otherwise. The harmony of the piano prelude is very straightforward according to the I-IV-V-I scheme. The first sentence is rather horizontal at a high pitch, while the second one is rising from Gis1 till B2, where the start is just the E chord.
The second theme is exposed in m. 16-20 and repeated in m. 20-24. Its atmosphere is completely different because of the staccato piano, with a lot of rests in between. Recognize the cluster A-B-Cis on the first beat of m. 18. Then the first theme is repeated in G major in stead of E major in m. 24-28. Then the third theme is exposed in G major in m. 28-32 and repeated in B major in m. 32-36.
In m. 37-40 the first theme is exposed again in E by the piano. Starting with m. 41 the first theme is repeated in B, while the voice adds a variation on the second theme to it. Starting with m. 45 the second half of the first theme is both in piano and voice, continuing in B, followed by a repetition of the second theme.
Then a variation of the first theme is exposed by the voice, with very large intervals. A Gis7 chord with an accent on the dissonant accompanies the voice, where the bass line is a variation on the voice melody. In m. 60 the Gis7 chord is solved towards Cis. Then m.56-60 are repeated with an Ais7 chord that solves towards Dis, and becomes a B7 chord with the word "Ach", started with a sforzato. "Ach" it is start of the eighth strophe and is transformation from dream into reality.
In m. 69 the eight-quarter rhythm is disrupted and a variation of the first half of the first theme is presented, where eight measures instead of four measures are used for this half of the theme. Recognize the dissonant on the second beat of m. 69, where a B7 and Fis7, chord, i.e. V and II in E, are combined in one chord. This variation of the first part of theme A is repeated in m. 76-84. Then a variation on the third theme appears twice in m. 84-96 (in E (I) and A (IV)), also in half the original tempo. Finally, in m. 96-104, the voice ends with some afterthoughts, using motives of the parts before, and accompanied with mainly diminished chords in the piano. In the adagio this lack of direction in the harmony suggests how the dreams vanish like spraying foam.
The postlude provides an afterthought by a pianissimo staccato repetition of the first part of the first theme, that vanishes just like the spraying foam. The notes on the third beat give a suggestion of the rhythm during the dream, but not much of it is left.