Sexual function, including vaginal atrophy, and hormonal status, were studied in 42 naturally postmenopausal women. Vaginal pulse amplitude and subjective sexual responses during self-induced erotic fantasy and during erotic films were compared with responses of a small number of premenopausal women. As predicted, vaginal atrophy was related to estrogens but not to complaints of vaginal dryness and dyspareunia. No significant relationship was found between hormones and sexual function. Unexpectedly, most of the few correlations that did reach significance involved prolactin. The fact that prolactin was negatively associated with sexual desire, sexual arousal and vaginal lubrication during sexual activity, suggests that psychosocial factors are more important than hormone levels in postmenopausal sexual function. Comparisons with a number of premenopausal women revealed that although postmenopausal women displayed lower vaginal pulse amplitude responses prior to erotic stimulation than the premenopausal women, this difference disappeared during subsequent erotic stimulation. We argued that this finding can be interpreted as being supportive of the notion that complaints of vaginal dryness and dyspareunia should not be attributed to vaginal atrophy associated with menopause. Rather, vaginal dryness and dyspareunia seem to reflect sexual arousal problems.