Estradiol (E2) is a potent neuroactive steroid that acts through both nuclear and membrane estrogen receptors (ER) found widely distributed in the brain. Although long known for its role in the neural control of reproduction, more recent work demonstrates that E2 also affects learning and memory, as well as anxiety and depressive symptoms. These findings prompted studies on the neural consequences of long-term E2 deprivation in postmenopausal women. Despite hundreds of studies in animal models and women, the advisability of hormone replacement therapy (HRT) for neuroprotection remains a contentious issue because the effects of estrogen vary among studies. One difficulty in reconciling the conflicting results is the lack of integration across the neuroscience sub-disciplines that contribute to the field. To address this issue, we first review data on E2 regulation of cognition and mood, as well as on factors that may contribute to the disparate findings across studies. GABA and glutamate are proximal regulators of cognition and mood; therefore we next review review data showing that E2 acts through nuclear- and membrane-initiated mechanisms to regulate GABA and glutamate signaling, respectively. We also review evidence that these E2 signaling mechanisms change with age. Finally, we propose a molecular and cellular model of how E2 can have positive, negative, or no effects on neural functions in the aging brain, and we highlight the current gaps in the literature. Addressing these gaps will facilitate development of the mechanism-based strategies needed for designing more effective HRT regimens.