Although the basal ganglia have been implicated in the development of movement disorders since the 1940s, the exact role played by these structures has remained elusive. The development of the 1-methyl-4-phenyl-1,2,3,6-tetrahydropyridine-monkey model of parkinsonism, and the recent resurgence of surgical therapy for the treatment of hypokinetic and hyperkinetic movement disorders has, however, led to an improved understanding of the pathophysiological mechanisms that underlie their development. In this article, we review the functional organization and examine the changes in neuronal activity that occur in the basal ganglia thalamocortical 'motor' circuit in these disorders. An alternative to the classic 'rate' model for Parkinson's disease is presented that incorporates the observed changes in neuronal activity, as well as additional neuronal pathways that contribute to these changes. Based on studies in animal models and humans with hyperkinetic movement disorders, it is postulated that dyskinesias develop as the result of a combination of excessive reductions in the mean discharge rate, altered patterns and increased synchronization of neurons in the internal segment of the globus pallidus. It is further postulated that the particular type of involuntary movement which develops also depends on the relative change in neuronal activity in the direct, indirect and alternative pathways. Support for these postulates is examined, and models for drug-induced dyskinesia, hemiballismus and dystonia are proposed.