I know the excitement that come with catching your newborn smiling. It doesn’t even matter if it is deliberate or not, it is heartwarming all the same. This is the real reason why babies smile.
When you see your baby smiling in sleep, or even laughing, it is because of certain brain functions induced by REM sleep (his is the sleep stage in which we dream).
When a baby is having a good feeling in sleep, he smiles in response to it. Babies may also smile just as they are falling asleep or waking up, which could be a reaction to the pleasurable or good feelings they experience at the time.
Now you know why your little pumpkin smiles in her sleep.