Background and purpose Cannabidiol has been reported to act as an antagonist of cannabinoid agonists at type 1 cannabinoid receptors (CB1). We hypothesized that cannabidiol can inhibit cannabinoid agonist activity through negative allosteric modulation of CB1. Experimental approach CB1 internalization, arrestin2 recruitment, and PLCβ3 and ERK1/2 phosphorylation, were quantified in HEK 293A cells heterologously expressing CB1 and in the STHdhQ7/Q7 cell model of striatal neurons endogenously expressing CB1. Cells were treated with 2- arachidonylglycerol or Δ9 -tetrahydrocannabinol alone and in combination with different concentrations of cannabidiol. Key results Cannabidiol reduced the efficacy and potency of 2-arachidonylglycerol and Δ9 – tetrahydrocannabinol on PLCβ3- and ERK1/2-dependent signaling in cells heterologously (HEK 293A) or endogenously (STHdhQ7/Q7) expressing CB1. By reducing arrestin2 recruitment to CB1, cannabidiol treatment prevented CB1 internalization. The allosteric activity of cannabidiol depended upon polar residues being present at positions 98 and 107 in the extracellular amino-terminus. Conclusions and implications Cannabidiol behaved as a non-competitive negative allosteric modulator of CB1. Allosteric modulation, in conjunction with non-CB1 effects, may explain the in vivo effects of cannabidiol. Allosteric modulators of CB1 have the potential to treat central nervous system and peripheral disorders while avoiding the adverse effects associated with orthosteric agonism or antagonism of CB1.