BACKGROUND Clinical trials involving human subjects give rise to ethical and medico-legal dilemmas. Essential research of new drugs may potentially expose patients to ineffective medications or to placebo. The complexity of the problem increases when dealing with mentally ill patients, for whom, on the one hand there is no known cure for their disease, and on the other hand, it is sometimes questionable whether or not they are able to provide informed consent to participate in clinical trials. OBJECTIVE The Israel Psychiatric Association decided to develop a position paper on the subject of placebo-controlled clinical trials in schizophrenia patients. METHODS Discussion groups were established, and the available material in the professional literature was examined, with an emphasis on recent developments. The Declaration of Helsinki and its amendments were analyzed, and experts in the field were consulted. CONCLUSIONS Clinical drug trials for development of new medications are essential in all fields of medicine, especially in psychiatry. The requirement for a placebo arm in pharmaceutical trials presents ethical and clinical dilemmas that are especially complicated with regard to mentally ill persons whose free choice and ability to provide informed consent may be questionable. However, we do not believe that this predicament justifies unconditional rejection of placebo use in psychiatry, when it may provide substantial benefit for some patients. Simultaneously, it is our duty to provide stringent restrictions that will enable strict supervision over the scientific, clinical and ethical aspects of the trials. CONCLUSIONS We propose the following criteria for approval of pharmaceutical trials that include a placebo arm: scientific justification; clinical and ethical justification; provision of informed consent; recruitment of patients hospitalized voluntarily; prevention of harm; administration of additional potential therapeutic interventions; benefit to patients participating in the study; control and follow-up procedures for the study as determined by the local Helsinki Committee; and appointment of a supervisory mechanism by the administration of the medical institution where the study is being performed.