A yarn is another word for a story or a tall tale, often told with a feeling of historical significance or legend.
If we are told a yarn in dreams it can be a symbol of our need for a hero or heroine, or perhaps a wise old man or woman to show us the way.
Yarn as in wool is often seen in neat balls or in a jumbled, spaghetti-like mess. In this sense our dreams of yarn can reflect and ability, or want, to create something orderly from something chaotic.
The above can also be the case when we view yarn being spun in dreams, either by a machine or an old fairy-tale like spinning wheel. However this can also signify that we can make anything we want, create our own story from the threads we are given to create our life.
Also when someone is said to be ‘spinning a yarn’, they are thought to be trying to deceive you. If this is the feeling you get from the dream it may be a warning not to trust the source of the yarn, or tale.