MAC layer misbehavior due to selfish or malicious reasons can significantly degrade the performance of mobile ad hoc networks. Currently, detection systems for handling selfish misbehavior has been proposed and studied. In this paper we study a new class of malicious misbehaviors that causes transmission timeout of MAC frames at either the transmitter side or the receiver side. A misbehaving node fully cooperates by forwarding packets for other nodes and completely adheres to the proper selection of backoff intervals; however, it maliciously forces the forwarding operation to fail in order to either disrupt the route discovery process or cause damage to the existing flows routed through itself. We design and implement a new detection and reaction system DREAM (a system for Detection and REAction to timeout mac layer Misbehavior) that identifies the malicious nodes through a set of monitoring and reaction procedures. Once a misbehaving node is detected, the system reacts, by adapting simple protocol parameters, to mitigate the negative effects. We describe the detection system and the different reaction procedures for different misbehaviors. We evaluate through network simulations the effectiveness of the system in detecting malicious nodes and improving the network performance.