Bipolar affective disorder is a common, severe, chronic, and often life-threatening illness, associated with other medical and psychiatric conditions (i.e., co-morbidity). The treatment of this devastating disorder was revolutionized by the discovery of lithium's antimanic effects over fifty years ago. Recent molecular and cellular biological studies have identified a number of unexpected targets for this monovalent cation, notably glycogen synthase kinase-3 and neurotrophic signaling cascades. These findings are leading to a reconceptualization of the biological underpinnings of bipolar disorder and are resulting in considerable interest in utilizing lithium for the treatment of certain neurodegenerative disorders. We review recent insights into lithium's actions including its direct inhibitory actions on inositol monophosphatase, inositol polyphosphate 1-phosphatase, glycogen synthase kinase-3, fructose 1,6-bisphosphatase, bisphosphate nucleotidase, and phosphoglucomutase enzymes. We also discuss lithium's intracellular downstream targets including adenylate cyclase, the phosphoinositol cascade (and its effect on protein kinase C), arachidonic acid metabolism, and effects on neurotrophic cascades. Many of the new insights of lithium's actions may lead to the strategic development of improved therapeutics for the treatment of bipolar disorder.