Muhayyelat (1796, Imaginary Lives) written by Giritli Aziz Efendi (1749-1798), consisted of three phantasms in which mystical experiences, realistic descriptions of Istanbul and supernatural affairs amalgamated each other.The collection was not only a rewriting of the stories in One Thousand and One Nights, The Thousand and One Days, Latifi's Ibretnuma, El-Ferec bad'eş-Şidde but also a model text for modern Ottoman stories, novels and dramas. During the emergence of modern Ottoman literature (after 1850s), Muhayyelat was rediscovered by Ottoman readers. It was first published in 1852 and had five editions between 1852 and 1873. Modern Ottoman authors produced some works based on the plot, characters and phantasms in Muhayyelat. Salim's play Sözde Sebat (1870) was an adaptation of "Recep Beşe" story in Muhayyelat. Salim added a melodramatic dimension to a mystico-realistic story. The mystical and traditional imagination of "Recep Beşe" was translated into a melodramatic imagination. The plot and characters were depicted in a psychologized and romanticized manner. In 1877, Ahmet Mithat Efendi wrote a parody of Muhayyelat: Çengi was also a cultural and literary appropriation of Cervantes' Don Quixote. The title of the first chapter was "A Don Quixote in Istanbul". Çengi became an intertextual space produced out of Muhayyelat and Don Quixote. Sözde Sebat and Çengi will be the main examples in my discussion. Focusing on the reception and appropriation of Muhayyelat in the nineteenth century, I aim to understand how modern Ottoman literature grew out of classical Ottoman story and modern European novel. The following will be my research questions: How did modern Ottomans read and rewrite Muhayyelat? How was Muhayyelat's narrative discourse translated into a psychologized and romanticized style? How was mystical content of Muhayyelat appropriated in modern Ottoman texts? What was the function of genre transitions during the cultural translation process of Muhayyelat?