The pros and cons of estrogen therapy for use in postmenopausal women continue to be a major topic of debate in women's health. Much of this debate focuses on the potential benefits vs. harm of estrogen therapy on the brain and the risks for cognitive impairment associated with aging and Alzheimer's disease. Many animal and human studies suggest that estrogens can have significant beneficial effects on brain aging and cognition and reduce the risk of Alzheimer's-related dementia; however, others disagree. Important discoveries have been made, and hypotheses have emerged that may explain some of the inconsistencies. This review focuses on the cholinergic hypothesis, specifically on evidence that beneficial effects of estrogens on brain aging and cognition are related to interactions with cholinergic projections emanating from the basal forebrain. These cholinergic projections play an important role in learning and attentional processes, and their function is known to decline with advanced age and in association with Alzheimer's disease. Evidence suggests that many of the effects of estrogens on neuronal plasticity and function and cognitive performance are related to or rely upon interactions with these cholinergic projections; however, studies also suggest that the effectiveness of estrogen therapy decreases with age and time after loss of ovarian function. We propose a model in which deficits in basal forebrain cholinergic function contribute to age-related changes in the response to estrogen therapy. Based on this model, we propose that cholinergic-enhancing drugs, used in combination with an appropriate estrogen-containing drug regimen, may be a viable therapeutic strategy for use in older postmenopausal women with early evidence of mild cognitive decline.