The link was strongest in London with 30.3 percent of new cases and in Amsterdam with half of the new cases.
The researchers found that compared with never users, daily cannabis use correlated with increased odds of psychotic disorder (adjusted odds ratio, 3.2); for daily use of high-potency types of cannabis, the odds were increased almost fivefold (adjusted odds ratio, 4.8).
The paper was published online Tuesday by the journal Lancet.
"Our findings also indicate for the first time how cannabis use affects the incidence of psychotic disorder at a population level".
"The use of cannabis with a high concentration of THC has more harmful effects on mental health than the use of weaker forms", said lead author Marta Di Forti, a professor at the Institute of Psychiatry, Psychology and Neuroscience at King's College London.
The researchers found that throughout 11 cities in Europe and one in Brazil, one in five new cases of psychosis was linked to daily marijuana use and one in 10 with high-potency cannabis.
Researchers in the new study estimate that banning high-potency strains of marijuana like "trainwreck", "gorilla glue" and "hindu kush" would cut psychosis cases across Europe by 12 percent. These participants were diagnosed with their first episode of psychosis between May 2010 and April 2015. They found 901 cases.
The researchers then asked those diagnosed with psychosis as well as a group of more than 1,200 healthy people about their weed habits-things like if they used weed, how often, and what kind.
For daily users of high-potency cannabis the risk of psychosis was four times higher across the whole sample and was five times higher in London and nine times higher in Amsterdam, compared with individuals who had never used high-potency cannabis.
High-potency cannabis was classified as having THC content over 10 percent. High potent weed strains are commonly available in both countries.
Can cannabis use raise risk of psychosis? She said it was unknown how frequently people could smoke lower-potency marijuana without raising their likelihood of psychosis, but that less than weekly use appeared to pose no risk.
Participants were made to answer a questionnaire to know if they used cannabis in their lifetime; if the answer was affirmative, they were requested to give details on their pattern of use.
David Nutt, head of the centre for neuropsychopharmacology at Imperial College London, said it was "important to realise that THC is well known to produce psychosis in healthy volunteers - people without a predisposition to mental illness".