Placebo controls are commonly used in clinical trials of investigational treatments because they have important advantages. In recent years, some have criticized the use of placebo-controlled trials when effective alternative therapy exists, regardless of the expected effect of the therapy. In part 1 of this paper, ethical arguments are addressed and the interpretive problems inherent in the use of active-control equivalence trials to establish efficacy of a new treatment are clarified. However, uncertainties may complicate decisions about appropriate use of placebo controls in some situations. Part 2 discusses more fully the ethical considerations for using placebo controls in particular medical settings. The value and relevance of placebo-controlled trials of new agents in situations in which proven effective therapy is available are also explored.