The therapeutic response to a drug treatment is a mixture of direct pharmacological action and placebo effect. Therefore, harnessing the positive aspects of the placebo effect and reducing the negative ones could potentially benefit the patient. This article is aimed at providing an overview for clinicians of the importance of contextual psychosocial variables in determining treatment response, and the specific focus is on determinants of the placebo response. A better understanding of the physiological, psychological, and social mechanisms of placebo may aid in predicting which contexts have the greatest potential for inducing positive treatment responses. We examine the evidence for the role of psychological traits, including optimism, pessimism, and the effect of patient expectations on therapeutic outcome. We discuss the importance of the patient-practitioner relationship and how this can be used to enhance the placebo effect, and we consider the ethical challenges of using placebos in clinical practice.