I've heard of melatonin causing nightmares but not preventing them. For me, melatonin doesn't play a noticeable role in whether I get nightmares or not, as far as I can tell. Are there any life factors going on that could be stressing you out? Anything that makes you nervous for the upcoming day? I think I tend to get nightmares when I'm anticipating a busy day ahead; it's just how my stress manifests. Think about anything else in your life that might have changed recently besides your melatonin intake. It might be related to something else going on in your life right now and not necessarily the melatonin. Give yourself enough time to wind down before bed and clear your head. Sometimes keeping something on in the background can help me avoid nightmares as long as it isn't loud or violent (look up sleep meditation tracks, white noise, ASMR, and similar things). I try to keep my mind blank, which is way easier said than done, but just try not to think of any heavy subjects before drifting off. I tell myself my only responsibility right now is to sleep or at the very least just rest. Also, when I do a lot of walking before bedtime, I fall asleep almost instantly without needing to take anything, and I stay asleep for a long time (but it doesn't take my nightmares away). I know nightmares can be a pain to deal with so just know that you aren't alone and I'm wishing you lots of luck. Hope you can figure out something soon and get the good sleep you deserve!

i have a similar experience. i started melatonin for my insomnia, which i thought worked at first but it wasn't so effective after a little while. all it ended up doing was cause vivid nightmares every night and fatigue that lasts into the next day. idk what alternatives might be better but i eventually decided melatonin wasn't for me.

Melatonin barely worked for me but I was put on it for a couple weeks after multiple traumatic events before being upgraded in a mental ward to meds a lot stronger