Narcolepsy is mainly associated with excessive daytime sleepiness, but the characteristic feature is abnormal rapid eye movement (REM) sleep phenomena. REM sleep disturbances can manifest as cataplexy (in narcolepsy type 1), sleep paralysis, sleep-related hallucinations, REM sleep behavior disorder, abnormal dreams, polysomnographic evidence of REM sleep disruption with sleep-onset REM periods, and fragmented REM sleep. Characterization of REM sleep and related symptoms facilitates the differentiation of narcolepsy from other central hypersomnolence disorders and aids in distinguishing between narcolepsy types 1 and 2. A circuit comprising regions within the brainstem, forebrain, and hypothalamus is involved in generating and regulating REM sleep, which is influenced by changes in monoamines, acetylcholine, and neuropeptides. REM sleep is associated with brainstem functions, including autonomic control, and REM sleep disturbances may be associated with increased cardiovascular risk. Medications used to treat narcolepsy (and REM-related symptoms of narcolepsy) include stimulants/wake-promoting agents, pitolisant, oxybates, and antidepressants; hypocretin agonists are a potential new class of therapeutics. The role of REM sleep disturbances in narcolepsy remains an area of active research in pathophysiology, symptom management, and treatment. This review summarizes the current understanding of the role of REM sleep and its dysfunction in narcolepsy.