Pain requires the integration of sensory, cognitive, and affective information. The use of placebo is a common methodological ploy in many fields, including pain. Neuroimaging studies of pain and placebo analgesia (PA) have yet to identify a mechanism of action. Because PA must result from higher order processes, it is likely influenced by cognitive and affective dimensions of the pain experience. A network of brain regions involved in these processes includes the anterior and posterior insula (A-Ins, P-Ins), dorsal anterior cingulate cortex (DACC), dorsolateral prefrontal cortex (DLPFC), and the supplementary motor area (SMA). We used connectivity analyses to investigate the underlying mechanisms associated with Placebo analgesia in a group of chronic pain patients. Structural equation models (SEM) of fMRI data evaluated the inter-regional connectivity of these regions across three conditions: (1) initial Baseline (B1), (2) placebo (PA), and (3) Placebo Match (PM). SEM results of B1 data in the left hemisphere confirmed hypothesized regional relationships. However, inter-regional relationships were dynamic and the network models varied across hemispheres and conditions. Deviations from the B1 model in the PA and PM conditions correspond to our manipulation of expectation for pain. The dynamic changes in inter-regional influence across conditions are interpreted in the context of a self-reinforcing feedback loop involved in the induction and maintenance of PA. Although it is likely that placebo analgesia results partly from afferent inhibition of a nociceptive signal, the mechanisms likely involve the interaction of a cognitive-affective network with input from both hemispheres.