This article provides information on the effects of estrogen as a psychotherapeutic agent. Estrogen has a positive effect on several neurotransmitter systems that are assumed to be involved in regulation of affect, behavior, and cognition. Clinical studies suggest that an important cause of nonresponsiveness to antidepressants in postmenopausal women may be inadequate hormone replacement. Potential uses of estrogen as a mood stabilizer or mood enhancer also are described in this article. In the area of behavior, estrogen regulates aggressivity, sexual drive, impulsivity, and hostility. In terms of cognition, evidence suggests the importance of estrogen in the prevention and treatment of Alzheimer's-type dementia. At the end of the article, future research directions are discussed.