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Cannabidiol has been reported to act as an antagonist at cannabinoid CB1 receptors. We hypothesized that cannabidiol would inhibit cannabinoid agonist activity through negative allosteric modulation of CB1 receptors.Internalization of CB1 receptors, arrestin2 recruitment, and PLCβ3 and ERK1/2 phosphorylation, were quantified in HEK 293A cells heterologously expressing CB1 receptors and in the STHdhQ7/Q7 cell model of striatal neurons endogenously expressing CB1 receptors. Cells were treated with 2-arachidonylglycerol or Δ9-tetrahydrocannabinol alone and in combination with different concentrations of cannabidiol.Cannabidiol reduced the efficacy and potency of 2-arachidonylglycerol and Δ9-tetrahydrocannabinol on PLCβ3- and ERK1/2-dependent signalling in cells heterologously (HEK 293A) or endogenously (STHdhQ7/Q7) expressing CB1 receptors. By reducing arrestin2 recruitment to CB1 receptors, cannabidiol treatment prevented internalization of these receptors. The allosteric activity of cannabidiol depended upon polar residues being present at positions 98 and 107 in the extracellular amino terminus of the CB1 receptor.Cannabidiol behaved as a non-competitive negative allosteric modulator of CB1 receptors. Allosteric modulation, in conjunction with effects not mediated by CB1 receptors, may explain the in vivo effects of cannabidiol. Allosteric modulators of CB1 receptors have the potential to treat CNS and peripheral disorders while avoiding the adverse effects associated with orthosteric agonism or antagonism of these receptors.