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Reality in Buddhism is called dharma (Sanskrit) or dhamma (Pali). This word, which is foundational to the conceptual frameworks of the Indian religions, refers in Buddhism to the system of natural laws which constitute the natural order of things. Dharma is therefore reality as-it-is (yatha-bhuta). The teaching of Gautama Buddha constituting as it does a method by which people can come out of their condition of suffering (dukkha) involves developing an awareness of reality (see mindfulness). Buddhism thus seeks to address any disparity between a person's view of reality and the actual state of things. This is called developing Right or Correct View (Pali: samma ditthi). Seeing reality as-it-is is thus an essential prerequisite to mental health and well-being according to Buddha's teaching.

Buddhism addresses deeply philosophical questions regarding the nature of reality. One of the fundamental teachings is that all the constituent forms (sankharas) that make up the universe are transient (Pali: anicca), arising and passing away, and therefore without concrete identity or ownership (atta). This lack of enduring ownership or identity (anatta) of phenomena has important consequences for the possibility of liberation from the conditions which give rise to suffering. This is explained in the doctrine of interdependent origination.

One of the most discussed themes in Buddhism is that of the emptiness (sunyata) of form (Pali: rūpa), an important corollary of the transient and conditioned nature of phenomena. Reality is seen, ultimately, in Buddhism as a form of 'projection', resulting from the fruition (vipaka) of karmic seeds (sankharas). The precise nature of this 'illusion' that is the phenomenal universe is debated among different schools. For example;
  • Some consider that the concept of the unreality of "reality" is confusing. They posit that, in Buddhism, the perceived reality is considered illusory not in the sense that reality is a fantasy or unreal, but that our perceptions and preconditions mislead us to believe that we are separate from the elements that we are made of. Reality, in Buddhist thought, would be described as the manifestation of karma[citation needed].
  • Other schools of thought in Buddhism (e.g., Dzogchen), consider perceived reality literally[citation needed] unreal. As a prominent contemporary teacher puts it: "In a real sense, all the visions that we see in our lifetime are like a big dream [...]".[1] In this context, the term 'visions' denotes not only visual perceptions, but appearances perceived through all senses, including sounds, smells, tastes and tactile sensations, and operations on received mental objects.

Reality in Buddhist sutras