Objective To determine whether use of cannabis in adolescence increases the risk for psychotic outcomes by affecting the incidence and persistence of subclinical expression of psychosis in the general population (that is, expression of psychosis below the level required for a clinical diagnosis). Design Analysis of data from a prospective population based cohort study in Germany (early developmental stages of psychopathology study). Setting Population based cohort study in Germany. Participants 1923 individuals from the general population, aged 14-24 at baseline. Main outcome measure Incidence and persistence of subthreshold psychotic symptoms after use of cannabis in adolescence. Cannabis use and psychotic symptoms were assessed at three time points (baseline, T2 (3.5 years), T3 (8.4 years)) over a 10 year follow-up period with the Munich version of the composite international diagnostic interview (M-CIDI). Results In individuals who had no reported lifetime psychotic symptoms and no reported lifetime cannabis use at baseline, incident cannabis use over the period from baseline to T2 increased the risk of later incident psychotic symptoms over the period from T2 to T3 (adjusted odds ratio 1.9, 95% confidence interval 1.1 to 3.1; P=0.021). Furthermore, continued use of cannabis increased the risk of persistent psychotic symptoms over the period from T2 to T3 (2.2, 1.2 to 4.2; P=0.016). The incidence rate of psychotic symptoms over the period from baseline to T2 was 31% (152) in exposed individuals versus 20% (284) in non-exposed individuals; over the period from T2 to T3 these rates were 14% (108) and 8% (49), respectively. Conclusion Cannabis use is a risk factor for the development of incident psychotic symptoms. Continued cannabis use might increase the risk for psychotic disorder by impacting on the persistence of symptoms.