Drug policy reform, also known as drug law reform, is a term used to describe proposed changes to the way most governments respond to the socio-cultural influence on perception of psychoactive substance use. Proponents of drug policy reform believe that prohibition of drugs—such as cannabis, opioids, cocaine, amphetamines and hallucinogens—has been ineffectual and counterproductive. They argue that rather than using laws and enforcement as the primary means to responding to substance use, governments and citizens would be better served by reducing harm and regulating the production, marketing and distribution of currently illegal drugs in a manner similar to (or some would say better than) how alcohol and tobacco are regulated.

Proponents of drug law reform argue that relative harm should be taken into account in the scheduling of controlled substances. Addictive drugs such as alcohol, tobacco and caffeine have been a traditional part of Western culture for centuries and are legal, when in fact the first two are more harmful than some substances scheduled under Schedule I. The U.S. National Institute for Occupational Safety and Health, a branch of the U.S. Centers for Disease Control, rated the hallucinogen psilocybin (Schedule I) less toxic than Aspirin. The Dutch government found this also to be true. The addictive properties of the drug nicotine in tobacco are often compared with heroin or cocaine, but tobacco is legal, even though the World Health Organization (WHO) in the 2002 World Health Report estimates that in developed countries, 26% of male deaths and 9% of female deaths can be attributed to tobacco smoking. According to the American Heart Association, "Nicotine addiction has historically been one of the hardest addictions to break." The pharmacologic and behavioral characteristics that determine tobacco addiction are similar to those that determine addiction to drugs such as heroin and cocaine.

Policy reform, in addition to its more general meanings, has been used to refer to a future scenario which relies on government action to correct economic market failures and to stimulate the technological investment necessary for sustainable development and the creation of a truly sustainable planetary society.

Policy reform entails understanding the successes and failures of various reforms through a cross country comparison of reform policies and experiences in different regions. Questions to address: (1)Why were some countries able to undertake reform while others were not? (2)What factors enabled some countries to achieve success in implementing reform programs, while for others, these programs failed? (3)What were the characteristics of reform programs that helped them deliver outcomes? It is apparent that a focus on the standard economic analysis with its emphasis on macroeconomic imbalances and projected policy impacts on long-run growth was not sufficient in understanding the complexities of the reform process. A more detailed study is needed to adopt a multidisciplinary approach with a strong emphasis on political economy and to understand the behavior of various stakeholders – how they reacted to new policy regimes and institutional configurations.

A drug policy most often refers to a government's attempt to combat the negative effects of drug addiction and misuse in its society. Governments try to combat drug addiction with policies which address both the demand and supply of drugs, as well as policies which can mitigate the harms of drug abuse. Demand reduction measures include prohibition, fines for drug offenses, incarceration for persons convicted for drug offenses, treatment (such as voluntary rehabilitation or coercive care for drug abusers), awareness campaigns, community social services, and support for families. Supply side reduction involves measures such as enacting foreign policy aimed at eradicating the international cultivation of plants used to make drugs and interception of drug trafficking. Policies which may help mitigate the effects of drug abuse include needle exchange and drug substitution programs, as well as free facilities for testing a drug's purity.

There is a movement in Australia to make some substances decriminalised, particularly cannabis, making the possession of such a non-convictable offence in most states (however, the definition of what constitutes possession can differ between states). As a result of the decriminalisation, the punishments for drug use and drug dealing in Australia are typically very small, with many convicted small-time drug dealers not having to spend any time in jail^{[citation needed]} .