Placebo analgesia is often conceptualized as a reward mechanism. However, by targeting only negative experiences, such as pain, placebo research may tell only half the story. We compared placebo improvement of painful touch (analgesia) with placebo improvement of pleasant touch (hyperhedonia) using functional MRI and a crossover design. Somatosensory processing was decreased during placebo analgesia and increased during placebo hyperhedonia. Both placebo responses were associated with similar patterns of activation increase in circuitry involved in emotion appraisal, including the pregenual anterior cingulate, medial orbitofrontal cortex, amygdala, accumbens, and midbrain structures. Importantly, placebo-induced coupling between the ventromedial prefrontal cortex and periaqueductal gray correlated with somatosensory decreases to painful touch and somatosensory increases to pleasant touch. These findings suggest that placebo analgesia and hyperhedonia are mediated by activation of shared emotion appraisal neurocircuitry, which down- or upregulates early sensory processing, depending on whether the expectation is reduced pain or increased pleasure.