Contrary to widely held beliefs, menopause is not associated with an increase in psychiatric illness. Although just prior to menopause there is a slight increase in minor psychological symptoms, prevalence rates of depression fall postmenopause. Hypotheses for the occurrence of depression in some perimenopausal women include: a pre-existing sensitivity to the change in the gonadal hormones leading to decreases in neural transmitters; reactions to the physiological changes associated with menopause such as night sweats, or the influence of a multitude of negative attitudes and expectations concerning menopause. The loss of the protective effects of estrogen may be related to the slight increase in the incidence of schizophrenia in women at menopause. The role of hormone replacement therapy (HRT) in treating psychiatric symptoms remains poorly understood. In nondepressed women, HRT may improve well-being either as a direct effect or as a consequence of reduced physical symptoms and fear of aging. In women with moderate to severe depressions, HRT alone does not appear to be beneficial. HRT may have some beneficial effects on short term memory. More research is needed to assess the possible role of HRT in augmenting the effects of antidepressant and antipsychotic medications.