Yes, 'Dances with Wolves' is based on a real story. The movie was inspired by the novel of the same name by Michael Blake, which in turn was based on historical events and the relationship between white settlers and Native American tribes in the 19th - century American West.
Well, 'Dances with Wolves' has roots in true history, but it's not a strict documentary. It weaves fictional elements into a backdrop that draws from real-life circumstances.