Gamma-hydroxybutyrate (GHB) is a catabolite in brain of gamma-aminobutyrate (GABA) and is also found in nonneuronal tissues. It is present in the brain at about one thousandth of the concentration of its parent compound. High affinity and specific uptake, and energy dependent transport systems for GHB have been described in brain in addition to a class of high affinity binding sites, functional at a rather unphysiologically low pH. Administration of large doses of GHB to animals and man leads to sedation, and at the highest doses, anaesthesia. These effects are prominent when GHB brain levels are over one hundred-fold the endogenous levels. In some animals, GHB administration also induces an electroencephalographic and behavioural changes resembling that of human petit mal epilepsy. GHB has been used in man as an anaesthetic adjuvant. GHB lowers cerebral energy requirements and may play a neuroprotective role. Administered GHB profoundly effects the cerebral dopaminergic system by a mechanism which remains to be unravelled. GHB has been tested with success on alcoholic patients where it attenuates the withdrawal syndrome. It is indicated here that in this situation, it may owe its effect by acting as a pro-drug of the neurotransmitter GABA into which it can be transformed. As administration of GHB, a GABAB receptor agonist and a natural opioid peptide all elicit similar abnormal EEG phenomena, it may be suggested that they are acting via a common pathway. The petit mal epileptic effects of GHB might be ascribed to its direct, or indirect agonist properties after transformation to a pool of GABA at the GABAB receptor or via interactions at its own binding sites linked to a similar series of biochemical events. Some anticonvulsant drugs, the opiate antagonist naloxone and a synthetic structural GHB analogue antagonise certain behavioural effects of GHB administration. It is postulated that GHB exerts some of its effects via transformation to GABA pools, and that substances which inhibit this process antagonise its effects by blocking GABA formation. GHB has been proposed as a neurotransmitter, although straightforward evidence for this role is lacking. Evidence for and against GHB, as a neurotransmitter, is reviewed here together with a discussion of its potential as a therapeutically useful drug.