It said successful applicants would be able to cultivate cannabis plants with a high content of the psychoactive ingredient THC (tetrahydrocannabinol).
The move follows a memorandum of understanding with the UK Home Office, Guernsey States announced.
Cultivation of cannabis will only be permitted under licence, with applications handled by the new Bailiwick of Guernsey Cannabis Agency.
The Channel Islands Cannabis Industry Association said it was a "significant milestone" and put Guernsey on a level footing with other Crown Dependencies Jersey and the Isle of Man.
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Guernsey was one of the first to recognise the potential benefits that cannabis based products medicinal might bring. The MoU marks the start of a process that may allow these products to be produced on island for the benefit of patients within the Bailiwick and overseas.
All applications will be received by the newly created Bailiwick of Guernsey Cannabis Agency (BGCA). Successful applicants will then be able to cultivate cannabis plants with high THC content – the most psychoactive element of the plant – as they develop their products.
The Bailiwick's signed a Memorandum of Understanding (MoU) with the UK Home Office.
Deputy Al Brouard, President of the Committee for Health & Social Care
Prior to the agreement, only licences for the cultivation and processing of CBD products were available.
Market intelligence from industry experts, Prohibition Partners, estimate that the European medicinal cannabis market will grow to a value of £16.1bn by 2041 .
The medicinal cannabis market is one of the fastest growing cannabis sectors.