Lithium's therapeutic effects are thought to be partially attributable to its interactions with several signal transduction mechanisms. The cyclic AMP secondary messenger system is shown to be modulated by lithium. Lithium was found to increase the basal levels of cyclic AMP but impair receptor coupled stimulation of cyclic AMP production. It is hypothesized that the dual effects of lithium are due to the inhibition of G-proteins that mediate cyclic AMP production. Over a long period of lithium treatment, cyclic AMP and adenylate cyclase levels are further changed by gene transcription factors.