The only clear racial or ethnic lines in the story are between Native and non-Native Americans. These are made explicit through Codi's relationship with Loyd. As he takes her to the reservation, he explains Apache, Navajo, and Pueblo belief systems and lifestyles. He also talks openly, sometime jokingly sometimes seriously, about the interracial elements of their relationship. Although no one from either group disapproves, Loyd and Codi both must contend with their own stereotypes of each other.

Aside from the Native Americans, the racial and ethnic makeup of Grace is somewhat unclear. Spanish ancestry is specified as being mixed in with that of miners. Although the sustained use of Spanish through the generations and the setting of the text would suggest a Mexican-American or Chicano community, only Spanish ancestry is specified.

An ethnic or racial separation between the Noline family and the rest of Grace is suggested by the claim that the Nolines came from Illinois as well as by the sound of the last name. This turns out, however, to all be an invention of Doc Homer's. As it is revealed that the family Codi thought were the Nolines from Illinois are really the Nolinas from Grace, ethnic and racial distinctions are shown to be social constructions. They are not the result of biology or of nature, but of what people believe.

In many ways, Animal Dreams is a mystery. Codi must uncover the mystery of her family. We are not given clues to the answer to this mystery any sooner than Codi is, so we have to follow her path of detective work. First, Codi reveals that she herself has secrets. We do know the nature of the secrets Codi and Doc Homer hide form each other and the ones Codi hides from the others around her. This only serves, however, to further the sense that around any bend there may be a secret. As Codi divulges her own secrets, she uncovers those of her family.

The US government does more harm than good in Animal Dreams. At best, it is useless, and at worst it is murderous. The direct reference to the real events that occurred in Nicaragua in the 1980s is specified in the author's note at the beginning of the book. During the 1980s the US government spent millions of dollars supporting the Contras, a counterrevolutionary military group devoted to violently toppling the country's socialist government. Hallie describes the destruction and death caused by the Contras. When she is kidnapped, her friends in Nicaragua repeatedly tell Codi that in order to find out what has happened to Hallie, she ought to call the President of the United States. As the head of the US government, he is the only person who could find out what happened to her; the idea that a particular person is responsible for Hallie's abduction is reiterated. Although Codi does not call the president, she and all of her friends do write to all of their representatives and senators. After a lengthy period of time, they receive letters saying that the matter will be taken under consideration; this vague response is too little too late.

On the domestic front, the government is similarly characterized. Although the Environmental Protection Agency takes action when they are notified of the pollution of Black Mountain Mine, they only add insult to injury, requiring the company to dam the river rather than to clean it up. And local government is not any better than the federal. The Mayor of Grace does nothing more than make a few unsuccessful phone calls in order to address the problem. It is, however, thanks to a government policy that Grace is finally saved, suggesting that the US government can be a positive element. The finger is pointed more at bad politicians and at bad policies than at a bad system.