1. Estrogen exerts profound effects on mood, mental state and memory by acting on both "classical" monoamine and neuropeptide transmitter mechanisms in brain. Here we review an example of each type of action. 2. With respect to the effect of estrogen on central monoamine neurotransmission, low levels of estrogen in women are associated with the premenstrual syndrome, postnatal depression and post-menopausal depression. Sex differences in schizophrenia have also been attributed to estrogen. Previous studies have shown that estrogen stimulates a significant increase in dopamine2 (D2) receptors in the striatum. Here we show for the first time that estrogen also stimulates a significant increase in the density of 5-hydroxytryptamine2A (5-HT2A) binding sites in anterior frontal, cingulate and primary olfactory cortex and in the nucleus accumbens, areas of the brain concerned with the control of mood, mental state, cognition, emotion and behavior. These findings explain, for example, the efficacy of estrogen therapy or 5-HT uptake blockers such as fluoxetine in treating the depressive symptoms of the premenstrual syndrome. and suggest that the sex differences in schizophrenia may also be due to an action of estrogen mediated by way of 5-HT2A receptors. 3. With respect to the effect of estrogen on central neuropeptide transmission, estrogen stimulates the expression of the arginine vasopressin (AVP) gene in the bed nucleus of the stria terminalis (BNST) in rodents. This results in a 100-fold increase in AVP mRNA in the BNST and a massive increase in AVP peptide in the BNST and its projections to the lateral septum and lateral habenula. The BNST-AVP system enhances and/or maintains "social" or "olfactory" memory, and thus provides a powerful model for correlating transcriptional control of neuropeptide gene expression with behavior. Whether similar mechanisms operate in the human remain to be determined. 4. These two examples of the action of estrogen on central neurotransmission are discussed in terms of their immediate clinical importance for the treatment of depressive symptoms, their use as powerful models for investigations on the steroid control of central neurotransmitter mechanisms, and the role of estrogen as "Nature's" psychoprotectant.