Prostaglandins (PGs) are ubiquitous membrane-derived, lipid-signaling molecules with wide ranging effects throughout the body. In the brain, PGE(2) is the key regulator of fever after inflammation but is also implicated in neural development and synaptic plasticity. The steroid hormone estradiol is also a key regulator of neural development and synaptic plasticity. Recently, we showed that administering cyclooxygenase (COX) inhibitors to block PGE(2) production increased the total length of Purkinje cell dendrites, the number of dendritic spines, and the level of spinophilin protein, which is enriched in dendritic spines. Correspondingly, PGE(2) administration into the cerebellum decreased spinophilin protein content. We now report that PGE(2) stimulates estradiol synthesis in the immature rat cerebellum via enhanced activity of the aromatase enzyme. Treatment with cyclooxygenase inhibitors reduced cerebellar aromatase activity and estradiol content whereas PGE(2) administration increased both. Treatment with either PGE(2) or estradiol stunted Purkinje neuron dendritic length and complexity and produced a corresponding reduction in spinophilin content. Treatment with formestane to inhibit aromatase activity led to excessive sprouting of the dendritic tree, whereas elevated estradiol had the opposite effect. Electrophysiological measurements from Purkinje neurons revealed novel sex differences in input resistance and membrane capacitance that were abolished by estradiol exposure, whereas a sex difference in the amplitude of the afterhyperpolarization after an action potential was not. Correlated changes in action potential threshold suggest that prolonged alterations in neuronal firing activity could be a consequence of increased estradiol content during the second week of life. These findings reveal a previously unappreciated role for PG-stimulated steroidogenesis in the developing brain and a new potential route for inflammation-mediated disruption of neuronal maturation.