Physiological alterations in hormone levels during menopause have long been theorised to affect cognitive function and brain chemistry. The effects of oestrogen on the central nervous system may account for the neurological changes associated with menopause. Hormone replacement therapy is believed to modulate these changes and thus confer protection against age-related cognitive decline in postmenopausal women. Likewise, the development and severity of dementia is of significant concern in postmenopausal women and various therapeutic hormone replacement treatments have been postulated to be of benefit in this regard. This report will begin with an explanation of the physiological effects of oestrogen on brain function and the neurological changes resulting from fluctuations in hormone levels at the onset of menopause. An evaluation of the available medical literature will inform an exploration of the mechanisms of action of hormone replacement therapy and its efficacy in modulating cognitive decline, memory loss and the development and severity of dementia syndromes in postmenopausal women.