Estradiol-17beta is the most potent female sex hormone. In addition to its role in the control of primary and secondary sexual characteristics, it also influences the development of the brain. Furthermore, estradiol-17beta possesses neuroprotective properties that are mediated via receptor action and also independently of receptors. Several processes that are regulated by estradiol-17beta might influence the expression of Alzheimer's disease and schizophrenia. Differences between the sexes have been described in both disorders, and it has been suggested that these may be due to the action of oestrogens. Long-term oestrogen replacement has proved to be beneficial in the prevention and treatment of Alzheimer's disease and schizophrenia. The results, however, are controversial. Preliminary in vitro and in vivo findings, which are summarised in this review, encourage further studies with estradiol-17beta or its analogues as potential adjunctive interventions particularly in "negative syndrome" schizophrenia and in Alzheimer's disease.