In the Arabian Nights stories, the creature known for giving nightmares is the jinn, particularly in the form of the malevolent character called Shahrazad. This mystical being embodies the interplay between reality and dreams, often instilling both wonder and fear. The jinn can manipulate thoughts and influence dreams, thus playing a pivotal role in shaping the narrative's themes. Their presence serves as a reflection of the human psyche and the subconscious, highlighting the challenges between the known and unknown realms of existence, often teaching lessons about desires and consequences.