Background: The introduction of laws that permit the use of cannabis for medical purposes has led to the emergence of a medical cannabis industry in some US states. This study assessed the spatial distribution of medical cannabis dispensaries according to estimated cannabis demand, socioeconomic indicators, alcohol outlets and other socio-demographic factors. Methods: Telephone survey data from 5940 residents of 39 California cities were used to estimate social and demographic correlates of cannabis consumption. These individual-level estimates were then used to calculate aggregate cannabis demand (i.e. market potential) for 7538 census block groups. Locations of actively operating cannabis dispensaries were then related to the measure of demand and the socio-demographic characteristics of census block groups using multilevel Bayesian conditional autoregressive logit models. Results: Cannabis dispensaries were located in block groups with greater cannabis demand, higher rates of poverty, alcohol outlets, and in areas just outside city boundaries. For the sampled block groups, a 10 increase in demand within a block group was associated with 2.4 greater likelihood of having a dispensary, and a 10 increase in the city-wide demand was associated with a 6.7 greater likelihood of having a dispensary. Conclusion: High demand for cannabis within individual block groups and within cities is related to the location of cannabis dispensaries at a block-group level. The relationship to low income, alcohol outlets and unincorporated areas indicates that dispensaries may open in areas that lack the resources to resist their establishment.