The poem contrasts the nighttime, imaginative world of a child with his daytime, prosaic world.

In the first stanza, the child, on going to bed, imagines castles, dragons, magic fruits, and gallant horsemen. In the second stanza, the child wakes up. The objects he had imagined as enchanted and part of his medieval fairyland are now ordinary, everyday objects. For instance, the castle has become a chair, and the horsemen have become a pair of boots. The "blue" streams he imagined are now a bath and watering can. By light of day, he can no longer return to his imagined world.

This is a very simple poem, written in rhyming couplets from the point-of-view of a child. Some complexity is introduced, however, in the two repeated lines, "at seven, when I go to bed," and "at seven, when I wake again." Does the "seven" refer to the child's age, when he goes to bed and rises, or both? This is up to the reader to decide, but it is likely Stevenson meant both.

Stevenson's poem is about the imaginative power of children. When the child, who is seven, goes to bed, we read "I find such pictures in my head." The child dreams of imaginative scenes, such as castles with dragons, gardens with magic fruit, and towers with imprisoned ladies. The child imagines streams surrounding the magic land, as if it were a real place with a distinct topography. 

The second stanza of this poem is about how the magic land disappears when the child wakes up. Then, "The magic land I seek in vain." Though the child wants to return to the magic land, he or she only sees commonplace objects, such as a chair where the castle was located and a carpet instead of the garden. Instead of horsemen galloping on the edges of the magic land, there are boots by the door. Instead of rivers, the child sees a bath and a watering can. It is clear that the child transformed the objects in his or her room at night into magical objects.