Abstract There is an increasing evidence that corticosteroids damage the hippocampus in rodents and in primates. Hippocampal atrophy induced by corticosteroids may play an important role in the pathogenesis of a range of neuropsychiatric disorders. Hippocampus is necessary for short-term memory consolidation and HPA axis regulation. Signs of hippocampal damage (HPA dysregulation in combination with memory impairment) are found in affective disorders, Alzheimers disease and in posttraumatic stress disorder. MRI volumetry reveals reduced hippocampal volume in these diseases. Evidence supporting the glucocorticoid hypothesis of psychiatric disorders is reviewed in the first part of the paper. Unresolved questions concerning temporary aspects of neurodegeneration, causality, reversibility, type of damage, factors increasing hippocampal vulnerability, and both pharmacological (CRH antagonists, antiglucocorticoid drugs, GABA-ergic, serotonergic, glutamatergic agents) and non-pharmacological (psychotherapy) treatment approaches are discussed in the second part.