The brain aromatase (oestrogen synthase) hypothesis predicts that oestrogen plays important roles in both sexual behaviours and brain sexual differentiation. To elucidate the functions of oestrogen in the brain, we generated aromatase knockout (ArKO) mice, which showed undetectable oestrogen and enhanced androgen levels in blood. These ArKO mice exhibited an enhanced appetite and disorders in sexual motivation, sexual partnership preference, sexual performance, aggressive behaviour, parental behaviour, infanticide behaviour and exploratory (anxiety) behaviour. We characterised the brain-specific promoter of the mouse aromatase gene, and identified several crucial cis-acting elements and the minimal essential promoter region for brain-specific expression. Next, we introduced a transgene of human aromatase, controlled by the minimal promoter region, into the ArKO mouse. The resulting mouse (ArKO/hArom), whose preoptic area, hypothalamus and amygdala were exposed to oestrogens only in the perinatal period, and then to enhanced androgens and no oestrogens in adulthood, showed near recovery from behavioural disorders. These results suggest that local oestrogens acting in specific brain regions are involved in the organisation of sex-specific neural networks during the perinatal period. Finally, we examined effects of oestrogens on gene expression within specific brain regions in mice during the perinatal period using DNA microarray analysis. This assay revealed both up-regulated and down-regulated brain-specific genes, including those related to neuronal function. Specifically, genes involved in energy metabolism, cell proliferation/apoptosis and secretory/transport system were altered in ArKO mice compared to wild mice. These results suggest that brain oestrogens participate in the sexual differentiation of the brain by influencing gene expression.