The basal ganglia as a whole are broadly responsible for sensorimotor coordination, including response selection and initiation. However, it has become increasingly clear that regions of the basal ganglia are functionally delineated along corticostriatal lines, and that a modular conception of the respective functions of various nuclei is useful. Here we examine the specific role of the caudate nucleus, and in particular, how this differs from that of the putamen. This review considers converging evidence from multiple domains including anatomical studies of corticostriatal circuitry, neuroimaging studies of healthy volunteers, patient studies of performance deficits on a variety of cognitive tests, and animal studies of behavioural control. We conclude that the caudate nucleus contributes to behaviour through the excitation of correct action schemas and the selection of appropriate sub-goals based on an evaluation of action-outcomes; both processes fundamental to successful goal-directed action. This is in contrast to the putamen, which appears to subserve cognitive functions more limited to stimulus-response, or habit, learning. This modular conception of the striatum is consistent with hierarchical models of cortico-striatal function through which adaptive behaviour towards significant goals can be identified (motivation; ventral striatum), planned (cognition; caudate) and implemented (sensorimotor coordination; putamen) effectively.