Developments in understanding the neurobiology of late-life psychosis have centered primarily on structural, functional, and neurochemical factors. Structural factors have included the study of white matter hyperintensity signals on magnetic resonance imaging of the brain, and associated vascular diseases as possible etiologies of psychosis in the elderly. Functional studies have continued to note frontal and medial temporal lobe dysfunction. Important neurochemical factors in psychosis include dopamine systems, serine metabolism, and the role of neurotensin. The neurochemical basis of psychosis has been proposed as a dysfunction of the corticostriatal pathways with negative feedback disinhibition of the thalamus with resultant sensory flooding, which leads to the perception of psychosis in susceptible patients.