Although the psychiatric manifestations of heavy ethanol consumption have been well known for decades, studies on the structural changes at the level of the nerve cell which result from chronic ethanol administration are relatively recent. It is now well established that ethanol increases the fluidity of the neuronal membrane by changing the ratio of unsaturated to saturated fats in favour of the latter; in addition, the concentration of cholesterol is increased. These changes in lipid composition appear to be associated with the development of behavioural tolerance to the drug. The resultant change in membrane structure affects transport processes across the cell surface involving calcium and other electrolytes and the active transport of neurotransmitters such as the biogenic amines and GABA; there is evidence that neurotransmitter receptor function is also impaired as a consequence of the alteration in the membrane micro-environment brought about by chronic ethanol exposure. Such effects suggest that alterations in cellular function, and ultimately behaviour, are primarily the result of the changes in nerve membrane structure and function. The possible consequences of this with regard to the development of a therapy to counteract the neurotoxicity of ethanol are discussed.