Estrogen exerts a variety of electrophysiological, neurotrophic, and metabolic effects on neurons in the adult central nervous system. Recent epidemiological studies have suggested that estrogen, as hormone replacement therapy in postmenopausal women, may be protective against Alzheimer's disease; the biological basis for a potential neuroprotective effect of estrogen in humans is an area of intense current research. This review summarizes electrophysiological and cellular effects of estrogen on neuronal function, with particular emphasis on hypothalamic and hippocampal neurons. Classic electrophysiological studies are compared with more recent cellular and molecular analyses in an effort to illuminate significant relationships between data gathered over the last 30 years and from varied sources. Hypotheses are made for the mechanisms of estrogen action in the brain as well as the functional consequences of estrogen's effects for both normal brain function and pathological states.