Bipolar illness is a major psychiatric disorder that affects 1–3% of the worldwide population. Epidemiological studies have demonstrated that this illness is substantially heritable. However, the genetic characteristics remain unknown and a clear personality has not been identified for these patients. The clinical history of lithium began in mid-19th century when it was used to treat gout. In 1940, it was used as a substitute for sodium chloride in hypertensive patients. However, it was then banned, as it had major side effects. In 1949, Cade reported that lithium could be used as an effective treatment for bipolar disorder and subsequent studies confirmed this effect. Over the years, different authors have proposed many biochemical and biological effects of lithium in the brain. In this review, the main mechanisms of lithium action are summarised, including ion dysregulation; effects on neurotransmitter signalling; the interaction of lithium with the adenylyl cyclase system; inositol phosphate and protein kinase C signalling; and possible effects on arachidonic acid metabolism. However, none of the above mechanisms are definitive, and sometimes results have been contradictory. Recent advances in cellular and molecular biology have reported that lithium may represent an effective therapeutic strategy for treating neurodegenerative disorders like Alzheimer's disease, due to its effects on neuroprotective proteins like Bcl-2 and its actions on regulators of apoptosis and cellular resilience, such as GSK-3. However, results are contradictory and more specific studies into the use of lithium in therapeutic approaches for neurodegenerative diseases are required.