A central tenet of contemporary theories on mammalian brain and behavioural sexual differentiation is that an organisational action of testosterone, secreted by the male's testes, controls male-typical aspects of brain and behavioural development, whereas no active perinatal sex hormone signalling is required for female-typical sexual differentiation. Furthermore, the available evidence suggests that many, although not all, of the perinatal organisational actions of testosterone on the development of the male brain result from the cellular effects of oestradiol formed via neural aromatisation of testosterone. However, a default developmental programme for the female brain has been criticised. Indeed, we review new results obtained in aromatase knockout mice indicating that oestradiol actively contributes to the differentiation of female-typical aspects of brain and behavioural sexual differentiation. Furthermore, we propose that male-typical neural and behavioural differentiation occurs prenatally in genetic males under the influence of oestradiol, which is avoided in foetal genetic females by the neuroprotective actions of alpha-fetoprotein, whereas female-typical neural and behavioural differentiation normally occurs postnatally in genetic females under the influence of oestradiol that is presumably produced by the ovaries.