The nosology, classification, and biological basis of psychosis in the elderly have been much debated. Psychotic features are seen in schizophrenia, affective illness, and dementia in the elderly. This article reviews evidence for the biological basis of psychosis in older people. In schizophrenia, there is evidence of gender differences in brain volume loss and dopamine receptor numbers, possibly linked to estrogen loss in women. Neuroimaging evidence of ventricular brain changes and more dopamine receptors have also been documented. In Alzheimer's disease, genetic factors such as PS1 and ApoE4 have been associated with psychotic symptoms, and histopathological studies have revealed differences in neuronal pathology. Radiological studies have shown right and left hemisphere differences in size, blood flow, and glucose metabolism between psychotic and nonpsychotic patients. In affective illnesses, there is evidence of structural brain changes in psychotic depression. Ample evidence suggests that biological substrates underlie many psychotic symptoms. More research will identify causal links between brain changes, symptom appearance, and the effects of psychosocial factors in their genesis.