If you dream of forgiving someone, it symbolizes forgiveness and peace in your life. It indicates that you are freeing yourself from inner worries and resentment. Forgiveness is not just for others, but also a release for yourself. This dream suggests positive changes in your life and the potential for a long life. It also points to the possibility of gaining a reputation for your purity and good deeds.
From Imam Muhammad Ibn Seerin's Dictionary of Dreams According to Islamic Inner Traditions â entry "Pardon" (page 320).
If one forgives someone a sin, or a mistake, or an error in a dream, it means that God Almighty will forgive him his sins. It also means that he will live a long life, earn fame for his piety, live in God's protection, have a good heart and a forgiving nature. If one pardons a criminal in a dream, it also means that he will receive God's forgiveness in this world and on the Day of Judgment. To forgive and pardon someone when one has the power to do so in a dream represents one's faith, piety and fear of wrongdoing. If God Almighty, or if His Prophet (uwbp) pardon of forgive one's sins in a dream, it means that one will repent for his sin, receive guidance and attain a praiseworthy conclusion to his life in this world and in the hereafter. (Also see Amnesty)
Note: Islamic dream interpretation depends on the dreamer's circumstances and state. This is a general guide drawn directly from the source book.