Maladaptive daydreaming (MD) is a distinct clinical condition entailing an extensive addictive-compulsive immersion in vivid fantasy featuring complex scenarios, which causes distress or interference with daily functioning. It is often activated while listening to evocative music and accompanied by stereotypical movements. MD is strongly related to dissociation and seems to rely on an innate tendency for absorptive and imaginative fantasy. Through its rewarding properties, this form of immersive daydreaming becomes abnormal. MD may thus be viewed as a disordered form of dissociative absorption. We discuss and exemplify with clinical vignettes the shared phenomenological characteristics between MD and dissociative phenomena, such as double consciousness, vivid visual imagery, and the creation of internally narrated characters. MD characters can be experienced as somewhat independently-agentic, although unlike dissociative identity disorder (DID), they typically do not take control over the daydreamer’s behavior. We maintain that high absorption is a risk factor for developing dissociative disorders, specifically, Depersonalization-Derealization disorder, DID, and MD. In an etiological model, we delineate these relationships and the potential trajectories to MD. Although trauma may be one causal factor, we indicate several other etiological pathways to the development of MD. We discuss associations with related concepts and suggest directions for future research.