Parasomnias are abnormal events that occur while a person is asleep, and include sleep inertia, hypnogogic and hypnopompic hallucinations. Sleep inertia is manifested in episodes of confused and slowed thinking, disorientation regarding time and place, perceptual impairment, and inappropriate responsiveness to external stimuli. Hypnogogic and hypnopompic hallucinations are vivid perceptual experiences occurring at the onset (hypnogogic) of sleep or upon waking (hypnopompic). Sleep inertia and hypnogogic and hypnopompic hallucinations are not indicative of dementia, and can occur in someone who has excessive daytime sleepiness. Although numerous researchers have considered the typical syndromes of disorientation and hallucination, very little attention has been paid to the sleep perspective. This article attempts to clarify the distinction between parasomnias and dementia by analyzing the reasons for the occurrence of these syndromes, therefore enabling a correct diagnosis.