The pharmacological interventions available for individuals in the early stages of psychosis are extremely limited. For those at clinical high risk for psychosis, there is no licensed treatment available. For those with first-episode psychosis, all licensed antipsychotic medications act via dopamine D2 receptors. While treatment with antipsychotics is transformative in some patients, in others, it is ineffective. In addition, these medications can often cause adverse effects which make patients reluctant to take them. This is a particular problem in the early phases of psychosis, when patients are being treated for the first time, as unpleasant experiences may colour their future attitude towards treatment. Recent research has suggested that cannabidiol (CBD), a compound found in the Cannabis sativa plant, may have antipsychotic effects and relatively few adverse effects and could therefore be an ideal treatment for the early phases of psychosis, when minimising adverse effects is a clinical priority. In this review, we consider CBD's potential as a treatment in the clinical high risk and first-episode stages of psychosis. First, we describe the limitations of existing treatments at these two stages. We then describe what is known of CBD's mechanisms of action, effectiveness as a treatment for psychosis, adverse effects and acceptability to patients. We discuss how some of the outstanding issues about the utility of CBD in the early phases of psychosis may be resolved through ongoing clinical trials. Finally, we consider the impact of recreational cannabis use and over-the-counter cannabinoids preparations and discuss the potential therapeutic role of other compounds that modulate the endocannabinoid system in psychosis.