Peers recommended an urgent change in the law to allow derivatives of the drug to be used for the treatment of multiple sclerosis and chronic pain.
The 53-page report from the Lords Science and Technology Committee followed an eight-month inquiry. It will pile pressure on the Government to relax the blanket ban on cannabis which has lasted for the past 25 years.
So far, the Department of Health has always insisted that evidence of the medical benefits from cannabis was too weak to justify a relaxation of the law.
But in its report, the committee said it has been persuaded that cannabis should be moved from its listing as a Schedule 1 drug, where it cannot be used as a medicine except in research, to Schedule 2, allowing doctors and pharmacists to supply it on prescription.
Lord Perry of Walton, the committee's chairman, said clinical trials of cannabis should be mounted "as a matter of urgency for compassionate reasons" as thousands of patients could be helped.
"Considering the suffering of patients, it would be unjustified and inhumane to make them wait for much longer," he said.
The committee was less convinced about the drug's effectiveness in tackling other conditions, including epilepsy, glaucoma and asthma, but Lord Perry made clear that it would be at the discretion of a doctor when to prescribe.
He denied that the legalisation of cannabis for medical use would be the first step towards the decriminalisation of the drug for recreational use, saying they were "completely separate matters". There was still enough evidence of the toxic effects of cannabis, such as the exacerbation of pre-existing mental illness, psychological dependence and, in some cases, withdrawal symptoms, to justify keeping the ban on recreational use, the report added.
Lord Perry, who is 77, said: "Before any of you ask us if we have ever smoked pot, the answer is that we're not going to tell you. It's not relevant to the inquiry. But cannabis can be used to reduce the amount of morphine or heroin that is used for terminal conditions like cancer. This is clearer now than it was 25 years ago."
Because of the increased risk of cancer through smoking cannabis, the committee is calling for research into other ways of taking it, such as in liquid form.
A spokeswoman for the Royal Pharmaceutical Society of Great Britain said the Society would welcome reclassifying it as a Schedule 2 drug to make medical trials easier.
The Multiple Sclerosis Society endorsed the findings but said hospital specialists, not GPs, should be responsible for prescribing the drug.
"In the meantime, we hope prosecuting authorities and courts will deal compassionately with people with MS who are using cannabis," a spokesperson said.Reuse content