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The modulation of brain function and behavior by steroid hormones was classically associated with their secretion by peripheral endocrine glands. The discovery that the brain expresses the enzyme aromatase, which produces estradiol from testosterone, expanded this traditional concept. One of the best-studied roles of brain estradiol synthesis is the control of reproductive behavior. In addition, there is increasing evidence that estradiol from neural origin is also involved in a variety of non-reproductive functions. These include the regulation of neurogenesis, neuronal development, synaptic transmission, and plasticity in brain regions not directly related with the control of reproduction. Central aromatase is also involved in the modulation of cognition, mood, and non-reproductive behaviors. Furthermore, under pathological conditions aromatase is upregulated in the central nervous system. This upregulation represents a neuroprotective and likely also a reparative response by increasing local estradiol levels in order to maintain the homeostasis of the neural tissue. In this paper, we review the non-reproductive functions of neural aromatase and neural-derived estradiol under physiological and pathological conditions. We also consider the existence of sex differences in the role of the enzyme in both contexts.