This article reviews data on ethanol and neurosteroid interactions in the CNS. We discuss how GABAergic neurosteroids, including 3alpha,5alpha-TH PROG and 3alpha,5alpha-TH DOC, produced in response to systemic ethanol administration contribute to several of the effects of ethanol associated with modulation of GABA(A) receptors in rodents. There is an essential correlation between the time course of ethanol-induced 3alpha,5alpha-TH PROG production in the brain and specific behavioral and neural effects of ethanol. Furthermore, the anticonvulsant and inhibitory effects of ethanol on spontaneous neural activity were completely prevented by a key inhibitor of steroid biosynthesis. 3alpha,5alpha-TH PROG influences cognitive processing, spatial learning and memory and alters drinking behaviors in rats. Furthermore, ethanol induction of 3alpha,5alpha-TH PROG is diminished in tolerant and dependent animals. These effects are associated with increases in the sensitivity of GABA(A) receptors to neurosteroids and suggest an important role in ethanol withdrawal. Together, we suggest that 3alpha,5alpha-TH PROG and 3alpha,5alpha-TH DOC contribute to ethanol action and this interaction may represent a new mechanism of ethanol action. The identification of neurosteroid intermediaries involved in ethanol action may lead to important advances in the field and the development of novel therapeutics for alcoholism.