The balanced placebo design (BPD) was used to evaluate the independent effects of nicotine dose and smoking-related expectancies on self-reported anxiety, urge to smoke, and withdrawal symptoms. After anxious mood was induced, participants smoked either a de-nicotinized cigarette or one with standard nicotine content. Nicotine dose was crossed with instructions that the cigarette was either de-nicotinized or standard. Nicotine cigarettes produced greater anxiety reduction than de-nicotinized cigarettes. Nicotine instructions attenuated anxiety only among those who held relevant expectancies. Nicotine dose and instructional set interacted such that either nicotine cigarettes or instructions that the cigarettes contained nicotine were sufficient to reduce urge to smoke. Implications of these findings and methodological issues regarding use of the BPD with cigarettes are discussed.