Pain perception can be powerfully influenced by an individual's expectations and beliefs. Although the cortical circuitry responsible for pain modulation has been thoroughly investigated, the brainstem pathways involved in the modulatory phenomena of placebo analgesia and nocebo hyperalgesia remain to be directly addressed. This study used ultra-high-field 7 tesla functional MRI (fMRI) to accurately resolve differences in brainstem circuitry present during the generation of placebo analgesia and nocebo hyperalgesia in healthy human participants (N = 25, 12 male). Over 2 successive days, through blinded application of altered thermal stimuli, participants were deceptively conditioned to believe that two inert creams labeled lidocaine (placebo) and capsaicin (nocebo) were acting to modulate their pain relative to a third Vaseline (control) cream. In a subsequent test phase, fMRI image sets were collected while participants were given identical noxious stimuli to all three cream sites. Pain intensity ratings were collected and placebo and nocebo responses determined. Brainstem-specific fMRI analysis revealed altered activity in key pain modulatory nuclei, including a disparate recruitment of the periaqueductal gray (PAG)-rostral ventromedial medulla (RVM) pathway when both greater placebo and nocebo effects were observed. Additionally, we found that placebo and nocebo responses differentially activated the parabrachial nucleus but overlapped in engagement of the substantia nigra and locus coeruleus. These data reveal that placebo and nocebo effects are generated through differential engagement of the PAG-RVM pathway, which in concert with other brainstem sites likely influences the experience of pain by modulating activity at the level of the dorsal horn.