A convergence of evidence shows that use of Cannabis sativa is associated with increased risk of developing psychotic disorders, including schizophrenia, and earlier age at which psychotic symptoms first manifest. Cannabis exposure during adolescence is most strongly associated with the onset of psychosis amongst those who are particularly vulnerable, such as those who have been exposed to child abuse and those with family histories of schizophrenia. Schizophrenia that develops after cannabis use may have a unique clinical phenotype, and several genetic polymorphisms may modulate the relationship between cannabis use and psychosis. The endocannabinoid system has been implicated in psychosis both related and unrelated to cannabis exposure, and studying this system holds potential to increase understanding of the pathophysiology of schizophrenia. Anandamide signaling in the central nervous system may be particularly important. Δ 9 -Tetrahydrocannabinol in cannabis can cause symptoms of schizophrenia when acutely administered, and cannabidiol (CBD), another compound in cannabis, can counter many of these effects. CBD may have therapeutic potential for the treatment of psychosis following cannabis use, as well as schizophrenia, possibly with better tolerability than current antipsychotic treatments. CBD may also have antiinflammatory and neuroprotective properties. Establishing the role of CBD and other CBD-based compounds in treating psychotic disorders will require further human research.