Loss of ovarian function at the menopause results in an increased risk for cardiovascular disease and osteoporosis. Hormone replacement therapy (HRT) in postmenopausal women may reduce or remove this increased risk. The high hepatic bolus seen with oral steroid administration, which may produce unwanted metabolic effects, is avoided by transdermal administration. We studied the metabolic effects of transdermal HRT in comparison with oral HRT or no treatment in 96 healthy postmenopausal women over 3 years. Treatment consisted of either continuous oral conjugated equine estrogens, 0.625 mg daily, with sequential oral dl-norgestrel, 0.15 mg daily, for 12 days per month or continuous transdermal estradiol-17 beta, 0.05 mg daily, with sequential transdermal norethindrone acetate, 0.25 mg daily, for 14 days per month. We measured bone biochemistry and density, serum lipids, lipoproteins and apolipoproteins, and glucose, insulin, and C-peptide concentrations following an intravenous glucose bolus. Minimal modelling analyses provided measures of glucose and insulin kinetics. Both HRT regimens were effective in preventing bone loss, and produced generally favourable lipid and lipoprotein changes. Progestin addition prevented increases in HDL2 cholesterol, but lowered triglycerides. Transdermal estrogen lowered triglycerides, whereas oral estrogen increased them. Furthermore, oral HRT resulted in a deterioration in glucose tolerance and an overall increase in insulin secretion. Transdermal HRT appears at least as effective as oral HRT in preventing postmenopausal osteoporosis, and produces as good, if not better, changes in metabolic risk markers for cardiovascular disease.