Challenged out of dread (5)
I believe the answer is:
dared
'challenged' is the definition.
(daring is a kind of challenging)
'of dread' is the wordplay.
'of' indicates anagramming the letters (the answer comes from or 'of' the letters).
'dread' is an anagram of 'DARED'.
'out' is the link.
(Other definitions for dared that I've seen before include "Had the courage (to do something)" , "Defied, challenged" , "Was brave enough" , "Goaded" , "Risked" .)