Cannabinoid receptors, the molecular targets of the cannabis constituent Δ⁹-tetrahydrocannabinol, are present throughout the body and are normally bound by a family of endogenous lipids – the endocannabinoids. Release of endocannabinoids is stimulated in a receptor-dependent manner by neurotransmitters and requires the enzymatic cleavage of phospholipid precursors present in the membranes of neurons and other cells. Once released, the endocannabinoids activate cannabinoid receptors on nearby cells and are rapidly inactivated by transport and subsequent enzymatic hydrolysis. These compounds might act near their site of synthesis to serve a variety of regulatory functions, some of which are now beginning to be understood. Recent advances in the biochemistry and pharmacology of the endocannabinoid system in relation to the opportunities that this system offers for the development of novel therapeutic agents will be discussed.