Schizophrenia is a disabling illness that is typically first diagnosed during late adolescence to early adulthood. It has an unremitting course and is often treatment-resistant.Many clinical aspects of the illness suggest that sex steroid-nervous system interactions may contribute to the onset, course of symptoms and the cognitive impairment displayed by men and women with schizophrenia. Here, we discuss the actions of oestrogen and testosterone on the brain during adolescent development and in schizophrenia from the perspective of experimental studies in animals, human post-mortem studies, magnetic resonance imaging studies in living humans and clinical trials of sex steroid-based treatments. We present evidence of potential beneficial, as well as detrimental, effects of both testosterone and oestrogen. We provide a rationale for the necessity to further elucidate sex steroid mechanisms of action at different ages, sexes and brain regions to more fully understand the role of testosterone and oestrogen in the pathophysiology of schizophrenia. The weight of the evidence suggests that sex steroid hormones influence mammalian brain function, including both cognition and emotion, and that pharmaceutical agents aimed at sex steroid receptors appear to provide a novel treatment avenue to reduce symptoms and improve cognition in men and women with schizophrenia.