The placebo response is a major issue in clinical trials for psychiatric disorders. Possible contributing factors to this problem include diagnostic misclassification, issues concerning inclusion/exclusion criteria, outcome measures’ lack of sensitivity to change, measurement errors, poor quality of data entry and verification, waxing and waning of the natural course of illness, regression toward the mean phenomenon, patient and clinician expectations about the trial, study design issues, non-specific therapeutic effects, and high attrition. Over the past few decades, researchers have attempted to reduce the placebo effect in a variety of ways. Unfortunately, approaches with very little or no benefit have included restricting enrollment to selected populations, rater training, requirement of same rater, and placebo lead-in phases. Some benefits, although often marginal, have been derived from standardizing diagnostic procedures, managing clinicians’ overestimation of change, simplification of study visits and assessments, minimizing non-specific, therapeutic effects, extending trial duration, reducing number of sites, increasing the sensitivity of outcome measures, and reducing the number of treatment arms. Thus far, there has been no attempt to develop new study designs aimed at reducing the placebo effect. We are proposing a novel study design, called ‘Sequential Parallel Comparison Design’, suitable for double-blind, placebo-controlled trials in psychiatric disorders. This design is aimed at reducing both the overall placebo response rate and the sample size required for such trials. Its usefulness in clinical research needs to be tested empirically. If this study design were to be found to meet its stated goals, this could markedly facilitate the process of clinical development of new compounds for the treatment of psychiatric disorders.