This study investigated the relation between generalized anxiety disorder (GAD) and frequency of bad dreams in older adults. A secondary analysis from a randomized clinical trial comparing cognitive behavioral therapy (CBT) for anxiety to enhanced usual care (EUC) assessed bad dream frequency at baseline, post treatment (3 months), and at 6, 9, 12, and 15 months. Of 227 participants (mean age = 67.4), 134 met GAD diagnostic criteria (CBT = 70, EUC = 64), with the remaining 93 serving as a comparison group. Patients with GAD had significantly more bad dreams than those without, and bad dream frequency was significantly associated with depression, anxiety, worry, and poor quality of life. CBT for anxiety significantly reduced bad dream frequency at post treatment and throughout follow up compared to EUC.