Smoking marijuana or administration of its main active constituent, Δ⁹-tetrahydrocannabinol (Δ⁹-THC), may exert potent dilating effects on human airways^,,,. But the physiological significance of this observation and its potential therapeutic value are obscured by the fact that some asthmatic patients respond to these compounds with a paradoxical bronchospasm^,. The mechanisms underlying these contrasting responses remain unresolved. Here we show that the endogenous cannabinoid anandamide exerts dual effects on bronchial responsiveness in rodents: it strongly inhibits bronchospasm and cough evoked by the chemical irritant, capsaicin, but causes bronchospasm when the constricting tone exerted by the vagus nerve is removed. Both effects are mediated through peripheral CB1 cannabinoid receptors found on axon terminals of airway nerves. Biochemical analyses indicate that anandamide is synthesized in lung tissue on calcium-ion stimulation, suggesting that locally generated anandamide participates in the intrinsic control of airway responsiveness. In support of this conclusion, the CB1 antagonist SR141716A enhances capsaicin-evoked bronchospasm and cough. Our results may account for the contrasting bronchial actions of cannabis-like drugs in humans, and provide a framework for the development of more selective cannabinoid-based agents for the treatment of respiratory pathologies.