To investigate the role of androgens in increasing bone density and improving low libido in postmenopausal women, we have studied the long-term effects of estradiol and testosterone implants on bone mineral density and sexuality in a prospective, 2 year, single-blind randomised trial. Thirty-four postmenopausal volunteers were randomised to treatment with either estradiol implants 50 mg alone (E) or estradiol 50 mg plus testosterone 50 mg (E&T), administered 3-monthly for 2 years. Cyclical oral progestins were taken by those women with an intact uterus. Thirty-two women completed the study. BMD (DEXA) of total body, lumbar vertebrae (L1-L4) and hip area increased significantly in both treatment groups. BMD increased more rapidly in the testosterone treated group at all sites. A substantially greater increase in BMD occurred in the E&T group for total body (P < 0.008), vertebral L1-L4 (P < 0.001) and trochanteric (P < 0.005) measurements. All sexual parameters (Sabbatsberg sexual self-rating scale) improved significantly in both groups. Addition of testosterone resulted in a significantly greater improvement compared to E for sexual activity (P < 0.03), satisfaction (P < 0.03), pleasure (P < 0.01), orgasm (P < 0.035) and relevancy (P < 0.05). Total cholesterol and LDL-cholesterol fell in both groups as did total body fat. Total body fat-free mass (DEXA, anthropometry, impedance) increased in the E&T group only. We concluded that in postmenopausal women, treatment with combined estradiol and testosterone implants was more effective in increasing bone mineral density in the hip and lumbar spine than estradiol implants alone. Significantly greater improvement in sexuality was observed with combined therapy, verifying the therapeutic value of testosterone implants for diminished libido in postmenopausal women. The favourable estrogenic effects on lipids were preserved in women treated with T, in association with beneficial changes in body composition.