ABSTRACT: The ‘dream of the butterfly,’ which seals the second chapter of the Zhuangzi, is often interpreted as undergirded by the bipolarity of dreaming and awakening or by the elusive interchange of identities between Zhuangzi and the butterfly, dreamer and dreamed. In this paper I argue that the underlying structure of the story may be better interpreted as exhibiting not two, but three stages of development, consistently echoing other tripartite parables in the Zhuangzi. In my reinterpretation I rely on the phenomenology of dreams proposed by the Spanish philosopher María Zambrano, which distinguishes among three states: the primal dream, characterized by atemporality and wholeness; wakefulness, characterized by temporality and analytic thinking; and the creative dream, in which reality discloses itself as a meaningful, holistic unity. I suggest that Zhuangzi’s parable describes a similar self-transformative threefold process culminating in the joyous freedom of a shifting multifaceted subjectivity centered in the timeless pivot of the Dao.