Slappy in Dreamland (Goosebumps Slappyworld #16) by R. L. Stine

Richard Hsieh's dad studies dreams, and one day, they decide to hook Richard's new Slappy doll up to the dream machine as a joke. All of a sudden, Richard starts having nightmares of Slappy coming to life and wreaking havoc. But they're only dreams, right? Except, when his cousin Willow comes to visit, she also dreams of Slappy. It's impossible! But when Slappy threatens to invade more kids' dreams, they’ll have to figure out how to defeat him before he becomes a dream master.