This study examines the current knowledge of physiological and clinical effects of tetrahydrocannabinol (THC) and cannabidiol (CBD) and presents a rationale for their combination in pharmaceutical preparations. Cannabinoid and vanilloid receptor effects as well as non-receptor mechanisms are explored, such as the capability of THC and CBD to act as anti-inflammatory substances independent of cyclo-oxygenase (COX) inhibition. CBD is demonstrated to antagonise some undesirable effects of THC including intoxication, sedation and tachycardia, while contributing analgesic, anti-emetic, and anti-carcinogenic properties in its own right. In modern clinical trials, this has permitted the administration of higher doses of THC, providing evidence for clinical efficacy and safety for cannabis based extracts in treatment of spasticity, central pain and lower urinary tract symptoms in multiple sclerosis, as well as sleep disturbances, peripheral neuropathic pain, brachial plexus avulsion symptoms, rheumatoid arthritis and intractable cancer pain. Prospects for future application of whole cannabis extracts in neuroprotection, drug dependency, and neoplastic disorders are further examined. The hypothesis that the combination of THC and CBD increases clinical efficacy while reducing adverse events is supported.