In tests, the illegal drug had a dramatic effect on previously untreatable patients who had suffered post traumatic stress disorder (PTSD) for more than 19 years.
Doctors in the US held two eight-hour psychotherapy sessions three to five weeks apart for the patients during which they administered the ecstasy chemical MDMA.
Two months later, 80 per cent of those treated no longer had symptoms that met the medical definition of the disorder.
Ten of the 12 patients given the drug responded to the treatment, said the researchers led by Dr Rick Doblin, president of the Multidisciplinary Association for Psychedelic Studies in Santa Cruz, California.
In contrast, just two out of eight patients offered a "dummy" placebo showed an improvement.
Three individuals so badly affected they could not hold down a job were able to return to work.
The scientists have now had the go-head from the US regulatory body, the Food and Drug Administration, to carry out a bigger study of US war veterans. It will look at the effect of different doses of MDMA on ex-soldiers traumatised by their experiences in Iraq, Afghanistan and Vietnam.
But if successful, the treatment could affect other PTSD sufferers, including victims of accidents, natural disasters, or violent crime.
Writing in the Journal
of Psychopharmacology, the researchers said: "This pilot study demonstrates that MDMA-assisted psychotherapy with close follow-up monitoring and support can be used with acceptable and short-lived side effects in a carefully screened group of subjects with chronic, treatment-resistant PTSD.
"In this group, MDMA-assisted psychotherapy... produced clinically and statistically significant improvements in PTSD symptoms.." PTSD is characterised by exaggerated and uncontrolled fear responses triggered by memories of a traumatic event.