Nightmare Abbey, written in the early 1800s, is a satire of the conventions of Gothic novels as well as the Romantic movement in general. The character of Scythrop, who was named after an ancestor who killed himself out of boredom, is based on Thomas Love Peacock's good friend Percy Bysshe Shelley. Scythrop shares several key traits with the young Romantic writer; his work dwells on obscure subjects, and he spends his life in pursuit of romance, much like a Byronic hero. (Shelley, far from being offended by his friend's caricature, loved the portrait that Peacock painted of him. In fact, Shelley later named a tower—where he wrote the poem "The Cenci"—Scythrop's Tower.)

Moreover, the poet Mr. Flosky is generally believed to be a satirical representation of Samuel Taylor Coleridge; Mr. Flosky shares poetic idiosyncrasies with Coleridge as well as his personal philosophies and habits. By evoking these caricatures of famous figures in the Romantic movement, Peacock situates his work in relation to the minds that typified the genre that he is satirizing.

Central to Peacock's treatment of Romantic and Gothic ideals is the centrality of philosophical discourse in the novella. The characters discuss art, literature, history, and politics, and in one scene, Mr. Flosky discusses the nature of art and the artist and how truth is something that can be sought but not found. This is a central tenet of Romanticism, which was in part reactionary to the optimism of the Enlightenment—characterized by the belief in humanity's perfectibility and the ability to attain empirical truth.

Flosky explains that the mind, rather than accepting the tenets of Enlightenment, fled to the conventions of Romanticism—which was typified by the inscrutability of truth as evident in the workings of the natural and supernatural world. Flosky argues that the imagination is thus proven to be drawn to the darkest part of human nature. These discussions of the nature of truth and of the workings of the human mind can be seen as Peacock's evocation of contemporary philosophy in the early nineteenth century, and Nightmare Abbey thus becomes a backdrop for both explicit and implicit discourse on these ideas.

By pointedly evoking popular literary figures through his characters and placing them in constant philosophical dialogue, Peacock invites his reader to critically examine the doctrines that they espouse by situating these discussions in relation to material reality. For instance, while Flosky wholeheartedly sustains his belief in the supernatural, the novel itself disperses the fear of supernatural elements. The characters become convinced that there is a ghost in the abbey, but this figure is later revealed to be nothing more than a sleepwalking servant. Thus, Peacock uses his satire of Gothic tropes and Romantic ideals to call out the contrast between these literary conventions and the material reality of the world (and the absurdity that arises when one is applied to the other).