Sensorimotor gating, measured as the modification of eye blink startle reflexes to loud acoustic stimuli by quieter preceding stimuli, is altered in those with psychosis, their relatives and those at high clinical risk for psychosis. Alterations have also been shown in cannabis users, albeit to a lesser extent, and cannabis is a known risk factor for the onset of psychosis in clinically and genetically susceptible individuals. We examined the interaction between clinical risk for psychosis and cannabis use on sensorimotor gating, both Prepulse Inhibition (PPI) and Prepulse Facilitation (PPF). We tested PPI and PPF in participants with an At Risk Mental State (ARMS) for psychosis and a matched control group. Both groups included a proportion of subjects who had recently used cannabis, as confirmed by urinary drug screening (UDS) on the day of testing. We found that ARMS participants showed reduced PPF and PPI relative to controls, the latter driven by a group by cannabis use interaction, with recent use reducing PPI in ARMS participants but not in controls. When the analysis was limited to UDS-negative participants there was significantly reduced PPF in ARMS subjects relative to controls, but no differences in PPI. Within the ARMS group reduced sensorimotor gating, measured by both PPI and PPF, related to reduced overall level of function. Cannabis use in clinical high risk individuals may increase the risk of psychosis in part through worsening PPI, while PPF is altered in ARMS individuals irrespective of cannabis use. This develops our understanding of cognitive mechanisms leading to the experience of aberrant perceptual phenomena and the subsequent development of psychotic symptoms.