The mechanism of lithium's therapeutic action remains obscure, hindering the discovery of safer treatments for bipolar disorder. Lithium can act as an inhibitor of the kinase GSK3α/β, which in turn negatively regulates β-catenin, a co-activator of LEF1/TCF transcription factors. However, unclear is whether therapeutic levels of lithium activate β-catenin in the brain, and whether this activation could have a therapeutic significance. To address this issue we chronically treated mice with lithium. Although the level of non-phospho-β-catenin increased in all of the brain areas examined, β-catenin translocated into cellular nuclei only in the thalamus. Similar results were obtained when thalamic and cortical neurons were treated with a therapeutically relevant concentration of lithium in vitro. We tested if TCF7L2, a member of LEF1/TCF family that is highly expressed in the thalamus, facilitated the activation of β-catenin. Silencing of Tcf7l2 in thalamic neurons prevented β-catenin from entering the nucleus, even when the cells were treated with lithium. Conversely, when Tcf7l2 was ectopically expressed in cortical neurons, β-catenin shifted to the nucleus, and lithium augmented this process. Lastly, we silenced tcf7l2 in zebrafish and exposed them to lithium for 3 days, to evaluate whether TCF7L2 is involved in the behavioral response. Lithium decreased the dark-induced activity of control zebrafish, whereas the activity of zebrafish with tcf7l2 knockdown was unaltered. We conclude that therapeutic levels of lithium activate β-catenin selectively in thalamic neurons. This effect is determined by the presence of TCF7L2, and potentially contributes to the therapeutic response.