It is believed that sex hormones are synthesized in the gonads and reach the brain via the blood circulation. In contrast with this view, the authors have demonstrated that sex hormones are also synthesized locally in the hippocampus and that these steroids act rapidly to modulate neuronal synaptic plasticity. The authors demonstrated that estrogens are locally synthesized from cholesterol through dehydroepiandrosterone and testosterone in adult hippocampal neurons. Significant expression of mRNA for P450(17alpha), P450arom, and other steroidogenic enzymes was demonstrated. Localization of P450(17alpha) and P450arom was observed in synapses of principal neurons. In contrast to the slow action of gonadal estradiol, hippocampal neuron-derived estradiol may act locally and rapidly within the neurons. For example, 1 to 10 nM estradiol rapidly enhances long-term depression (LTD). The density of thin spines is selectively increased within two hours upon application of estradiol in pyramidal neurons. Estrogen receptor ERalpha agonist has the same enhancing effect as estradiol on both LTD and spinogenesis. Localization of ERalpha in spines in addition to nuclei of principal neurons implies that synaptic ERalpha is responsible for rapid modulation of synaptic plasticity by endogenous estradiol. Activin A, a peptide sex hormone, may also play a role as a local endogenous modulator of synaptic plasticity.