Androgen therapy is being increasingly used in the management of postmenopausal women. The most common indication is to improve sexual function. The aim of this review is to evaluate current knowledge pertaining to testosterone and sexual function in postmenopausal women.The change of testosterone levels during the menopause transition remains controversial. A correlation of endogenous testosterone levels and sexual function is still inconclusive. A Cochrane Review and recent randomized control trials have, however, consistently demonstrated that short-term testosterone therapy in combination with traditional hormone therapy regimens improves sexual function in postmenopausal women, particularly surgically menopausal women with hypoactive sexual desire disorder. An adverse effect on the lipid profile has been identified which appears to be mostly associated with oral methyltestosterone. Data for other effects of testosterone and long-terms risks are lacking. Testosterone may act in a variety of ways in different tissues. This is, however, an area that requires further investigation.Testosterone therapy is a promising option for treating women with hypoactive sexual desire disorder after surgical menopause. Two remaining questions need to be answer: who is most likely to benefit from testosterone therapy and what are the long-term health risks?