The apparent contradictions often encountered in Schnitzler's works result from his anxiety to view each problem from various angles. As the infinite possibilities encased in every situation are unlocked, the sharp distinctions between truth and fiction, reality and illusion, give way. The world becomes surcharged with magic, and our daily scenes take on a semblance of fairyland. A fragrant mist, a glamorous veil, overhangs all objects. We see of one another only our silhouettes, our shadows.

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Schnitzler often expresses the opinion that the illusion conjured up by an artist may contain more truth than actual facts that were or will be. Memory fails us; hope deceives us; mystery envelops us. Every night we descend into a strange realm in which our dreams exercise a more tyrannical sway over us than does all the wealth or logic of dazzling daylight.

In Traumnovelle, Schnitzler depicts dream hours that blend so perfectly with waking hours that the reader is unaware when the former begin and when the latter end. This tale, which appeared in 1926, centers about a couple who resemble Amadeus and Cäcilie, of the drama Zwischenspiel. The Viennese physician Fridolin and his wife, Albertine, have attended a masquerade ball. The insignificant flirtations which brushed past them at this affair pursue them in their dreams. The suppressed desires and “extra-marital” longings of both seek expression in illicit visions, when the rational faculties are dulled.

On the evening after the ball, a contemplative mood comes over the tired couple. Conscious of the dangerous adventures that might have resulted if they had followed every stirring of the heart, they confess to each other the ebb and flow of their inexplicable emotions. Albertine recalls a summer day at a Danish resort when she was seized by a violent affection for a strange young man. On that day she would have been ready, at a moment's notice, to leave her husband and child. But the young man paid not the slightest attention to her, and so she remained a faithful wife. Fridolin, too, tells of a similar temptation that once crossed his path. The confessions of the couple are interrupted by the maid. The physician is asked to hasten to the bedside of a patient who has just suffered a stroke.

Fridolin now goes through a series of weird experiences. He finds the patient dead. When he comforts the surviving daughter she confesses her long concealed love for him; and in the presence of the corpse she folds him in her arms. Disturbed by the arrival of her betrothed, Fridolin leaves. A prostitute invites him to follow her. A former classmate, who has been reduced to earning a living by playing the piano at disreputable coffeehouses, enables him to make his way into a secret night club, at which masked, naked women dance with elegant gentlemen of high society. Fridolin is warned by a beautiful mask to escape; but he remains, and is detected as an intruder. In his extreme peril, he is saved by the mysterious woman, who ransoms him with her body. He arrives home at four in the morning, and finds Albertine asleep. As he watches her, she awakens with an hysterical laugh. She, too, has gone through exciting adventures. She felt herself in the arms of many men and dreamed that her husband insisted upon remaining faithful to her even when subjected to torture and condemned to death. That Fridolin should submit for her sake to suffering and crucifixion at the very time when she was betraying him with others seemed so silly to her that she could not refrain from laughing shrilly, and thus she awoke.

Fridolin is horrified. His wife's dream reveals her true nature to be faithless, cruel, and treacherous. He determines to avenge himself by continuing his adventures of the preceding hours. But these adventures now afford him little satisfaction. The daughter of the deceased patient arouses no longings in him. The prostitute has been transferred to the hospital. The mysterious woman is nowhere to be found. She may, or may not, be the suicide whose body has been delivered to the morgue. He returns again to the side of his wife, and, sobbing, confesses his aberrations. “What are we to do now, Albertine?” he asks. She smiles, and after a moment's hesitation replies: “It seems to me we ought to be grateful to fate that we have come through unharmed from all adventures—from the real and the imaginary ones.” “Are you so sure of this?” he asks. And she answers: “As sure as I am of my belief that the reality of a night, or even of a person's entire life, does not wholly represent his innermost truth.” “And no dream is wholly a dream,” she adds, with a sigh.

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The more often Schnitzler analyzes abstract words, such as “love” or “faith,” “truth” or “freedom,” the less certain are we of their exact meaning. Each concept is divided into its component parts, and each component is resolved into its minute elements, and each element is still further subdivided into its manifold possibilities. In the end, we do not know whether we are dealing with the ultimate essence of reality or with figments of the imagination; and Schnitzler uses all the art at his disposal to further this confusion. It is his intention to break down the boundaries that we have erected between reality and fiction, truth and illusion, waking life and dream life, necessity and freedom, earnestness and play, good and evil, love and hate. He would substitute for them a constant awareness of the relativity of all knowledge and experience, a deep distrust of all dogmas, and a solemn awe before the insoluble mystery of all creation.