Imagined me in terror (7)
I believe the answer is:
dreamed
'imagined' is the definition.
(dreaming is a kind of imagining)
'me in terror' is the wordplay.
'in' is an insertion indicator.
'terror' becomes 'dread' (both can mean a feeling of angst).
'me' put within 'dread' is 'DREAMED'.
(Other definitions for dreamed that I've seen before include "Had a vision" , "had nightmare" , "Fantasised" , "Imagined" , "suffered delusions" .)