Abstract Background: Studies have described opposing perceptions of placebo use, with laypersons for and health-care workers against it. Opinions of medical students have not previously been elicited. This study was based on online electronic survey on beliefs, knowledge and attitudes about placebo therapy, that is, use of placebo in clinical practice, rather than in randomized controlled clinical trials. Methods: The participants were preclinical (years 1, 2) and clinical (years 3–5) medical students. Descriptive analyses and 2 tests were used to compare the opinions of preclinical and clinical students with statistical significance set at P < 0.05. Results: Four hundred and two (35.6%) out of 1153 students responded, of which 181 were preclinical and 221 were clinical students. Two hundred and eighty-five (70.9%) students felt that placebo therapy was acceptable and 134 (33.3%) believed that it was beneficial in organic disease. Fifty-two (12.9%) students felt that it was ethical to prescribe placebo for organic disease with known definitive treatment, 259 (64.4%) for organic disease with no known treatment and 328 (81.6%) for psychogenic disease. More preclinical than clinical students approved of placebo therapy (odds ratio 2.140 (95% confidence interval 1.161–3.944), P = 0.015) and opined that it was ethical to prescribe placebo therapy to organic diseases for which there was appropriate treatment (odds ratio 1.800 (95% confidence interval 0.992–3.266), P = 0.053). A greater number of clinical when compared with preclinical students said that there is evidence that placebo therapy has a beneficial effect on organic disease (odds ratio 2.299 (95% confidence interval 1.468–4.405), P < 0.001). Conclusion: Our medical students felt that placebo therapy is acceptable in certain situations. We identified their erroneous acceptance of placebo therapy in organic diseases, for which there is established treatment, as an area to be addressed in our undergraduate curriculum.