Although recreational and medicinal use of cannabis has been known for many centuries, it is only in recent decades that it has again attracted considerable systematic attention because of its adverse psychological and potential beneficial effects. This has also been prompted by better understanding of the molecular targets of cannabinoids in the living organism. While cannabis has attracted the attention of mental health professionals because of accumulating evidence linking regular frequent use of cannabis to psychotic disorders like schizophrenia, neuroscientists and pharmacologists have focused their attention on the potential beneficial effects of cannabinoids in neuropsychiatric diseases. However, evidence regarding the neurobiological basis of these adverse psychological or potential beneficial effects has been mainly derived from pre-clinical research. Developments in neuroimaging modalities now offer the unique opportunity to examine in vivo how the different cannabinoids may act on the human brain to mediate their effects. In this review, we focus on research investigating the effects of cannabinoids in the human brain using neuroimaging techniques and explore how this adds to the current understanding about the pathophysiological correlates of psychotic disorders and points towards newer therapeutic candidates for psychotic and anxiety disorders. Further, we also discuss how combining neuroimaging and pharmacological challenge with cannabinoids may open up newer avenues for target identification and validation in psychopharmacology.