De novo regeneration of Cannabis sativa L. (cannabis) using tissue culture techniques remains unreliable and infrequent. Conventional methods for the regeneration and transformation of cannabis have not achieved the reliability and replicability that need to be integrated into research and breeding programs. Protoplast systems are effective for gene expression studies and transformation and genome-editing technologies and open the possibility of somatic hybridization to create interspecific hybrids. To date, leaf-derived protoplasts have been isolated for transient gene expression studies, but protoplast-to-plant regeneration has not been reported. The present study aims to evaluate the efficacy of using a callus culture system as an abundant tissue source for protoplast isolation and lays the groundwork for a protoplast-to-plant regeneration system. Using hypocotyl-derived callus cultures, which are known to have relatively greater regenerative potential, the efficacy of protoplast isolation and initial cell division were assessed. In this study, the effect of 2-aminoindane-2-phosphonic acid (AIP), a competitive inhibitor of phenylalanine ammonia lyase (PAL), in callus culture media and the effect of subculture frequency on protoplast yield were assessed. This study found that inclusion of AIP at 1 mM resulted in a 334% increase in protoplast yield compared with AIP-free medium, representing the first known use of AIP in cannabis tissue culture. Inclusion of AIP led to a 28% decrease in total soluble phenolics and 52% decrease in tissue browning compared with the control medium. Lastly, a two-phase culture system for protoplast regeneration was tested. At a concentration of 2.0 × 105 protoplasts per mL, cell wall reconstitution and cell division were observed, providing one of the first know reports of cell division from cannabis protoplasts and setting the stage for the future development of a protoplast-to-plant regeneration system.