In addition to the systemic renin-angiotensin system (RAS), a local RAS has been identified. Recent research has focused on this latter system and has investigated the effects of locally generated angiotensin II, especially in the kidney, heart and CNS. In the mammalian brain, all components of the RAS are present including angiotensin AT(1) and AT(2) receptor subtypes. While the AT(1) receptor is responsible for the classical effects of angiotensin II, it has been found that the AT(2) receptor displays totally different signalling mechanisms and this has revealed hitherto unknown functions of angiotensin II. AT(2) receptors are expressed at low density in many healthy adult tissues, but are up-regulated in pathological circumstances, e.g. stroke or nerve lesion. Evidence has now emerged that the actions of angiotensin II that are exerted via the AT(2) receptor are directly opposed to those mediated by the AT(1 )receptor. For example, the AT(2) receptor has antiproliferative properties and therefore opposes the growth-promoting effect linked to AT(1) receptor stimulation. It has been reported that the AT(2) receptor regulates several functions of nerve cells, e.g. ionic fluxes, cell differentiation and axonal regeneration, but also modulates programmed cell death. It is possible that a more extensive knowledge of the AT(2) receptor could contribute to the understanding of the clinically beneficial effects of AT(1) receptor antagonists, as this treatment may unmask AT(2) receptor activity. This review presents selected aspects of advances in AT(2) receptor pharmacology, molecular biology and signal transduction with particular reference to possible novel therapeutic options for CNS diseases.