The neural mechanisms whereby placebo conditioning leads to placebo analgesia remain unclear. In this study we aimed to identify the brain structures activated during placebo conditioning and subsequent placebo analgesia. We induced placebo analgesia by associating a sham treatment with pain reduction and used fMRI to measure brain activity associated with three stages of the placebo response: before, during and after the sham treatment, while participants anticipated and experienced brief laser pain. In the control session participants were explicitly told that the treatment was inactive. The sham treatment group reported a significant reduction in pain rating (p=0.012). Anticipatory brain activity was modulated during placebo conditioning in a fronto-cingulate network involving the left dorsolateral prefrontal cortex (DLPFC), medial frontal cortex and the anterior mid-cingulate cortex (aMCC). Identical areas were modulated during anticipation in the placebo analgesia phase with the addition of the orbitofrontal cortex (OFC). However, during altered pain experience only aMCC, post-central gyrus and posterior cingulate demonstrated altered activity. The common frontal cortical areas modulated during anticipation in both the placebo conditioning and placebo analgesia phases have previously been implicated in placebo analgesia. Our results suggest that the main effect of placebo arises from the reduction of anticipation of pain during placebo conditioning that is subsequently maintained during placebo analgesia.