Use of estrogen therapy in the perimenopausal and postmenopausal periods has been shown in several clinical trials to help women maintain a premenopausal level of cognitive function. What is not yet fully understood is how the neurobiological effects of estrogen contribute to these cognitive effects. This review explores data from two related bodies of human literature that provide compelling evidence in support of the biological plausibility that estrogen treatment can benefit cognition. The first half of the literature review focuses on studies from the estrogen neuroimaging literature, and the second half focuses on pharmacologic challenge studies assessing estrogen-neurotransmitter interactions. We integrate these two bodies of literature by focusing on the neurophysiologic underpinnings of estrogen effects on cognition and linking these clinical studies to preclinical studies. The focus on verbal memory is important because it is a cognitive function that has been shown to change with estrogen treatment and predict Alzheimer's disease risk but is not addressed by preclinical studies. Overall, we conclude that estrogen interacts with cholinergic and serotonergic systems to affect hippocampal and frontal cortical brain areas and thereby enhance memory, particularly at the retrieval stage.