Cocaine dependence is associated with increased stress and drug cue-induced craving and physiological arousal but decreased prefrontal activity to emotional and cognitive challenge. As these changes are associated with relapse risk, we investigated the effects of α2 receptor agonist guanfacine on these processes. Twenty-nine early abstinent treatment-seeking cocaine dependent individuals were randomly assigned to either daily placebo or guanfacine (up to 3 mg) for four weeks. In a laboratory experiment, all patients were exposed to three 10-min guided imagery conditions (stress/stress, drug cue/drug cue, stress/drug cue), one per day, consecutively in a random, counterbalanced order. Subjective craving, anxiety and arousal as well as cardiovascular output were assessed repeatedly. Brain response to stress, drug cue and relaxing imagery was also assessed during a functional magnetic resonance (fMRI) imaging session. In the current study, guanfacine was found to be safe and well-tolerated. Lower basal heart rate and blood pressure was observed in the guanfacine versus placebo group. Guanfacine lowered stress and cue-induced nicotine craving and cue-induced cocaine craving, anxiety and arousal. The guanfacine group also showed increased medial and lateral prefrontal activity following stress and drug cue exposure compared with placebo. Data suggest further exploration of guanfacine is warranted in terms of its potential for reducing stress-induced and cue-induced drug craving and arousal.