This 2014 MIT/Harvard rodent study provided evidence that specific brainstem neurons (cholinergic, or containing acetylcholine) regulated dream sleep.

The researchers used a more exact technique that selectively activated just one neuron. They made the neurons in this study sensitive to light using an algae protein that responded to a specific light frequency. Once expressed in the neuron, the protein activated the neuron when that specific frequency of light was shown onto it.

“Interestingly, both manipulations resulted in a change in the number of REM [rapid eye movement] sleep episodes and did not change REM sleep episode duration, suggesting that the PPT [pedunculopontine tegmentumis part of the brainstem] involved in REM sleep initiation but not REM sleep maintenance.”

http://www.pnas.org/content/112/2/584.full “Optogenetic activation of cholinergic neurons in the PPT or LDT induces REM sleep”