Placebo response in the clinical trial setting is poorly understood and alleged to be driven by statistical confounds, and its biological underpinnings are questioned. Here we identified and validated that clinical placebo response is predictable from resting-state functional magnetic-resonance-imaging (fMRI) brain connectivity. This also led to discovering a brain region predicting active drug response and demonstrating the adverse effect of active drug interfering with placebo analgesia. Chronic knee osteoarthritis (OA) pain patients (n = 56) underwent pretreatment brain scans in two clinical trials. Study 1 (n = 17) was a 2-wk single-blinded placebo pill trial. Study 2 (n = 39) was a 3-mo double-blinded randomized trial comparing placebo pill to duloxetine. Study 3, which was conducted in additional knee OA pain patients (n = 42), was observational. fMRI-derived brain connectivity maps in study 1 were contrasted between placebo responders and nonresponders and compared to healthy controls (n = 20). Study 2 validated the primary biomarker and identified a brain region predicting drug response. In both studies, approximately half of the participants exhibited analgesia with placebo treatment. In study 1, right midfrontal gyrus connectivity best identified placebo responders. In study 2, the same measure identified placebo responders (95% correct) and predicted the magnitude of placebo's effectiveness. By subtracting away linearly modeled placebo analgesia from duloxetine response, we uncovered in 6/19 participants a tendency of duloxetine enhancing predicted placebo response, while in another 6/19, we uncovered a tendency for duloxetine to diminish it. Moreover, the approach led to discovering that right parahippocampus gyrus connectivity predicts drug analgesia after correcting for modeled placebo-related analgesia. Our evidence is consistent with clinical placebo response having biological underpinnings and shows that the method can also reveal that active treatment in some patients diminishes modeled placebo-related analgesia. Trial Registration ClinicalTrials.gov NCT02903238 ClinicalTrials.gov NCT01558700.