The brain, like the adrenals, gonads and the placenta, is a steroidogenic tissue. However, unlike classic steroidogenic tissues, the synthesis of steroids in the nervous system requires coordinated expression and regulation of genes encoding the steroidogenic enzymes in several different cell types (neurons and glia) at different locations in the nervous system, often at some distance from the cell bodies. Furthermore, the synthesis of these steroids might be developmentally regulated and related to their functions in the developing brain. The steroids synthesized by the brain and nervous system, given the name 'neurosteroids', have a wide variety of diverse functions. In general, they mediate their actions not through classic steroid hormone nuclear receptors, but through other mechanisms, such as ion-gated neurotransmitter receptors or direct/indirect modulation of other neurotransmitter receptors. We summarize the biochemistry of the enzymes involved in the biosynthesis of neurosteroids, their pharmacological properties and modes of action. The physiological relevance and potential uses of neurosteroids in certain human diseases are discussed.