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Although increasing rates of cannabis use and cannabis use disorder (CUD) are well documented among veterans, little is known about their use of cannabis specifically for medicinal purposes. The present study characterizes such use and compares veterans reporting cannabis use for medicinal (n = 66) versus recreational (n = 77) purposes on (a) sociodemographic factors, (b) psychiatric disorders (posttraumatic stress disorder [PTSD], major depressive disorder [MDD], and CUD), (c) other substance use, (d) reasons for cannabis use and cannabis-related problems, and (e) physical and mental health. Participants were veterans deployed post 9/11/2001 recruited from a Veterans Health Administration (VHA) facility (N = 143; mean [SD] age = 30.0 [6.6]; mean [SD] deployments = 1.7 [1.1]) who reported past-year cannabis use. The most frequently endorsed conditions for medicinal cannabis (MC) use were anxiety/stress, PTSD, pain, depression, and insomnia. In logistic regression analyses adjusted for frequency of cannabis use, MC users were significantly more likely (odds ratio [OR] = 3.16) to meet criteria for PTSD than were recreational cannabis (RC) users. Relative to RC users, MC users reported significantly greater motivation for using cannabis to cope with sleep disturbance, as well as significantly poorer sleep quality and worse physical health. Veterans who use cannabis for medicinal purposes differ significantly in sleep, physical, and mental health functioning than do veterans who use cannabis for recreational purposes. PTSD and sleep problems may be especially relevant issues to address in screening and providing clinical care to returning veterans who are using cannabis for medicinal purposes.