From the Super Mario Wiki
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Dream Eggs are special eggs that appear in Dreamy Driftwood Shore in Mario & Luigi: Dream Team. When the Bros. free Seadric, he suggests using Dream Eggs to expand Dreamy Driftwood Shore in order for them to hide Princess Peach, who turns out to be Kamek disguised as Peach. The Bros. receive the Dream Eggs from Seadric's siblings and use them to expand the dream world.
Expanded portions of Dreamy Driftwood Shore created by the Dream Eggs can be accessed by sliding the Circle Pad up when standing in front of the entrance.