Lithium remains the most widely used treatment for bipolar disorder, and this monovalent cation represents one of psychiatry's most important treatments. Despite its demonstrated efficacy in reducing both the frequency and severity of recurrent affective episodes and decades of clinical use, the molecular mechanisms underlying its therapeutic actions have not fully been elucidated. In this report, we review the exciting recent progress in the identification of key components of signal transduction pathways (in particular, guanine nucleotide—binding proteins G proteins], adenylyl cyclases, and protein kinase C isozymes) as targets for lithium's actions and attempt to integrate these effects with the large body of data emphasizing alterations in various neurotransmitter (particularly monoaminergic) systems. Regulation of signal transduction within critical regions of the brain by lithium affects the function of multiple neurotransmitter systems and may thus explain lithium's efficacy in protecting susceptible individuals from spontaneous, stress-induced, and drug-induced cyclic affective episodes. Recent evidence has also demonstrated significant effects of lithium on the regulation of gene expression in the central nervous system, effects that may play a major role in the long-term stabilization of mood. The identification of these intracellular targets for lithium's actions offers the potential for the development of novel, improved therapeutic agents and, in conjunction with molecular genetic approaches, may facilitate our understanding of the biological factors predisposing individuals to manic-depressive illness.