The mechanisms underlying the psychotropic actions of lithium are not established, but modulation of endogenous brain neurotransmitter systems is likely to be important. Several interactions of lithium with muscarinic responses have been reported, including a marked potentiation of seizures produced by muscarinic agonists. Because the mechanism by which lithium augments muscarinic seizures may be related to the mechanism by which it produces its psychotropic effects, we have studied the interaction of lithium and muscarinic agonists in vitro. Using rat hippocampal slices, we found that a muscarinic agonist, pilocarpine, increased postsynaptic neuronal excitability, but simultaneously decreased synaptic transmission because of presynaptic inhibition. Lithium did not alter pilocarpine's postsynaptic excitatory actions, but reversed its presynaptic inhibitory action, leading to markedly increased action potential firing. These presynaptic effects are not caused by alterations in presynaptic action potential shape or reliability of conduction, and do not involve pertussis toxin-sensitive G proteins. Activation of protein kinase C with phorbol-12,13-dibutyrate, or inhibition with H-7 and sphingosine, did not affect muscarinic presynaptic inhibition, but abolished lithium's ability to enhance synaptic transmission, suggesting that this effect of lithium involves protein kinase C. We propose that presynaptic facilitation accounts for lithium's potentiation of muscarinic seizures. Since these effects occur with concentrations of lithium used clinically, similar presynaptic effects in endogenous brain neurotransmitter systems may be important for lithium's psychotropic actions.