The results of recent clinical studies have challenged our previously held view that estrogen therapy promotes neurological health and prevents or ameliorates Alzheimer's disease. A major question emerging from these studies is: how can there be such disparity between the basic science and epidemiological data that show that estrogen can protect neurons against degenerative insults and reduce the risk of Alzheimer's disease and the recent data (from the Women's Health Initiative Memory Study [WHIMS] trial and the trial of estrogen treatment for Alzheimer's disease), which show that hormone replacement therapy (HRT) showed no benefit and even a potential deleterious effect? Which set of data is correct? The proposition put forth in this review is that both sets of data are correct and that two major factors determine the efficacy of estrogen or HRT. First is the time at which estrogen therapy is initiated. The data indicate that initiation of therapy early in menopause and when neurons are in a healthy state, reduces the risk of Alzheimer's disease; whereas, estrogen therapy initiated after the disease has developed or decades following menopause is without benefit. Second, estrogen therapy is not the same as HRT and the type of progestogen used determines the outcome of the therapeutic intervention. Insights into the mechanisms of action of estrogen and progestogen in the brain provide a framework for understanding the paradox of the benefit of estrogen in the prevention of Alzheimer's disease versus the lack of benefit in treatment trials and in trials when HRT is instituted many years after menopause. Based on estrogen-inducible mechanisms, which have been elucidated in healthy neuron model systems, it would be predicted that estrogen therapy could be highly effective in preventing neurodegenerative disease by promoting neuronal defence and memory mechanisms. The mechanisms of action of estrogen also predict that estrogen therapy would be an ineffective strategy for reversing the pathology of Alzheimer's disease. In summary, the time at which estrogen therapy is initiated, the neurological status of the brain at the time of estrogen therapy initiation and the type of progestogen used all contribute to the efficacy of estrogen in preventing neurodegenerative disease and to sustaining neurological health and function. An estrogen advantage hypothesis is put forth that provides a unifying mechanism of estrogen action with implications for both the benefits and risks of estrogen therapy.