Despite a surge of studies on the effects of COVID-19 on our well-being, we know little about how the pandemic is reflected in people’s spontaneous thoughts and experiences, such as mind-wandering (or daydreaming) during wakefulness and dreaming during sleep. We investigated whether and how COVID-19-related general concern, anxiety, and daily worry are associated with the daily fluctuation of the affective quality of mind-wandering and dreaming, and to what extent these associations can be explained by poor sleep quality. We used ecological momentary assessment by asking participants to rate the affect they experienced during mind-wandering and dreaming in daily logs over a 2-week period. Our preregistered analyses based on 1,755 dream logs from 172 individuals and 1,496 mind-wandering logs from 152 individuals showed that, on days when people reported higher levels of negative affect and lower levels of positive affect during mind-wandering, they experienced more worry. Only daily sleep quality was associated with affect experienced during dreaming at the within-person level: on nights with poorer sleep quality people reported experiencing more negative and less positive affect in dreams and were more likely to experience nightmares. However, at the between-person level, individuals who experienced more daily COVID-19 worry during the study period also reported experiencing more negative affect during mind-wandering and during dreaming. As such, the continuity between daily and nightly experiences seems to rely more on stable trait-like individual differences in affective processing.