The theory that many serious mental illnesses, in particular psychoses such as schizophrenia, may have a significant hormonal aetiological component is fast gaining popularity and the support of scientific evidence. Oestrogen in particular has been substantially investigated as a potential mediator of brain function in schizophrenia. Epidemiological and life-cycle data point to significant differences in the incidence and course of schizophrenia between men and women suggests a protective role of oestrogen. In vitro and in vivo preclinical research confirms oestradiol's interactions with central neurotransmitter systems implicated in the pathogenesis of schizophrenia, while results from randomised controlled trials investigating the antipsychotic potential of oestrogen have been positive. Research into other neuroactive hormones with possible effects on mental state is a rapidly evolving field that may hold new promise. Given that schizophrenia and related psychoses are pervasive and debilitating conditions for which currently available treatments are often only partially effective and entail a high risk of serious side-effects, novel therapeutic strategies are needed. The literature reviewed in this paper suggests that hormones such as oestrogen could be a viable option, and it is hoped that with further research and larger trials, the oestrogen hypothesis can be translated into effective clinical practice.