A new and distinct Hosta plant named ‘;Dancing with Dragons’; of arching, ovate, strongly glaucous, blue-green leaves having a near white underside and wavy margins. The blue-green leaf coloration remains until near the end of the growing season. The flowers with white tepals having light lavender centers are tightly congested in verticils and individually on scapes above the foliage. ‘;Dancing with Dragons’; has excellent compact mounded habit and is useful in the landscape, in containers, as a specimen or en masse.