Genetic mutations of the X-linked gene MECP2, encoding methyl-CpG-binding protein 2, cause Rett syndrome (RTT) and other neurological disorders. It is increasingly recognized that MECP2 is a multifunctional protein, with at least four different functional domains: (1) a methyl-CpG-binding domain; (2) an arginine-glycine repeat RNA-binding domain; (3) a transcriptional repression domain; and (4) an RNA splicing factor binding region (WW group II binding domain). There is evidence that MECP2 is important for large-scale reorganization of pericentromeric heterochromatin during differentiation. Studies in MECP2-deficient mouse brain have identified a diverse set of genes with altered levels of mRNA expression or splicing. It is still unclear how altered MECP2 function ultimately results in neuronal disease after a period of grossly normal development. However, mounting evidence suggests that neuronal health and development depend on precise regulation of MECP2 expression. In genetically engineered mice, both increased and decreased levels of MECP2 result in a neurological phenotype. Furthermore, it was recently discovered that MECP2 gene duplications underlie a small number of atypical Rett cases and mental retardation syndromes. The finding that MECP2 levels are tightly regulated in neurons has important implications for the design of gene replacement or reactivation strategies for treatment of RTT, because affected individuals typically are somatic mosaics with one set of cells expressing a mutated MECP2 from the affected X, and another set expressing normal MECP2 from the unaffected X. Further studies are necessary to elucidate the molecular pathology of both loss-of-function and gain-of-function mutations in MECP2.