The discovery that the endogenous steroid derivatives 3 alpha-hydroxy-5 alpha-pregnan-20-one (allopregnanolone, or 3 alpha,5 alpha-TH PROG) and 3 alpha,21-dihydroxy-5 alpha-pregnan-20-one (allotetrahydrodeoxycorticosterone, or 3 alpha,5 alpha-TH DOC) elicit marked anxiolytic and anti-stress effects and selectively facilitate gamma-aminobutyric acid (GABA)-mediated neurotransmission in the central nervous system (see Chapter 3) has provided new perspectives for our understanding of the physiology and neurobiology of stress and anxiety. Evidence indicating that various stressful conditions that downregulate GABAergic transmission and induce anxiety-like states (Biggio et al., 1990) also induce marked increases in the plasma and brain concentrations of these neuroactive steroids (Biggio et al., 1996, 2000) has led to the view that stress, neurosteroids, and the function of GABAA receptors are intimately related. Changes in the brain concentrations of neurosteroids may play an important role in the modulation of emotional state as well as in the homeostatic mechanisms that counteract the neuronal overexcitation elicited by acute stress. Indeed, neurosteroids not only interact directly with GABAA receptors but also regulate the expression of genes that encode subunits of this receptor complex. This chapter summarizes observations from our laboratories and others, suggesting that neurosteroids and GABAergic transmission are important contributors to the changes in emotional state induced by environmental stress.