Changes in pain produced by psychological factors (e.g., placebo analgesia) are thought to result from the activity of specific cortical regions. However, subcortical nuclei, including the periaqueductal gray and the rostroventral medulla, also show selective activation when subjects expect pain relief. These brainstem regions send inhibitory projections to the spine and produce diffuse analgesic responses. Regrettably the precise contribution of spinal mechanisms in predicting the strength of placebo analgesia is unknown. Here, we show that expectations regarding pain radically change the strength of spinal nociceptive responses in humans. We found that contrary to expectations of analgesia, expectations of hyperalgesia completely blocked the analgesic effects of descending inhibition on spinal nociceptive reflexes. Somatosensory-evoked brain potentials and pain ratings further confirmed changes in spino-thalamo-cortical responses consistent with expectations and with changes in the spinal response. These findings provide direct evidence that the modulation of pain by expectations is mediated by endogenous pain modulatory systems affecting nociceptive signal processing at the earliest stage of the central nervous system. Expectation effects, therefore, depend as much about what takes place in the spine as they do about what takes place in the brain. Furthermore, complete suppression of the analgesic response normally produced by descending inhibition suggests that anti-analgesic expectations can block the efficacy of pharmacologically valid treatments which has important implications for clinical practice.