The present study prospectively examined the extent to which trauma-related nightmares affected the subsequent development of insomnia symptoms in 314 motor vehicle accident (MVA) victims. Participants were assessed in-hospital and at 2 weeks, 6 weeks, 3 months, and 1 year post-MVA. Hierarchical linear regression analyses showed that 6-week PTSD symptoms (PTSS) and 3-month nightmares, but not 2-week nightmares were positively associated with sleep onset and maintenance problems reported at 3-month post-MVA. Nightmares reported at 3-months post-MVA were positively associated with 1-year sleep maintenance problems. These findings highlight the dynamic relationship between PTSS and sleep problems as well as the potential importance of early intervention for trauma-related nightmares as a means to prevent sleep problems after a traumatic experience.