This paper reviews recent progress in the development and clinical application of testosterone transdermal delivery systems designed for physiological replacement therapy in men and women. The biopharmaceutic goal of physiologic replacement therapy is to produce serum levels and circadian patterns of testosterone and its active metabolites that mimic the normal physiology of testosterone in the particular target population. For the treatment of adult hypogonadal men, the nightly 24 h application of the Androderm testosterone transdermal system (5 mg per day) achieves this goal - as demonstrated in a series of clinical pharmacokinetic studies. For the treatment of adolescent males, physiologic replacement can be approximated by modifying the dose and duration of Androderm application so as to mimic the patterns of nocturnal testosterone secretion observed during puberty. With the objective of providing physiological replacement for women with diminished testosterone production, an experimental testosterone matrix transdermal system (TMTDS) has been developed and is currently undergoing clinical evaluation. In parallel with the development of testosterone transdermal systems, physicians have been investigating a number of conditions, in both males and females, where testosterone production is diminished and replacement therapy may be beneficial. Three of these new clinical applications will be illustrated - the use of Androderm for the treatment of adolescent males with beta-thalassemia, the use of Androderm for the treatment of HIV+ men, and the use of the TMTDS for the treatment of HIV+ women. From the biopharmaceutic and clinical perspectives, the development of testosterone transdermal systems represents an important achievement in controlled drug delivery.