The specific biochemical mechanism of lithium action in stabilizing mood is unknown.
Upon ingestion, lithium becomes widely distributed in the central nervous system and interacts with a number of neurotransmitters and receptors, decreasing norepinephrine release and increasing serotonin synthesis.
Unlike many other psychoactive drugs,  typically produces no obvious psychotropic effects (such as euphoria) in normal individuals at therapeutic concentrations.
Lithium may also increase the release of serotonin by neurons in the brain. In vitro studies performed on serotonergic neurons from rat raphe nuclei have shown that when these neurons are treated with lithium, serotonin release is enhanced during a depolarization compared to no lithium treatment and the same depolarization.
Lithium both directly and indirectly inhibits GSK3β (glycogen synthase kinase 3β) which results in the activation of mTOR. This leads to an increase in neuroprotective mechanisms by facilitating the Akt signaling pathway. GSK-3β is a downstream target of monoamine systems. As such, it is directly implicated in cognition and mood regulation. During mania, GSK-3β is activated via dopamine overactivity. GSK-3β inhibits the transcription factors β-catenin and cyclic AMP (cAMP) response element binding protein (CREB), by phosphorylation. This results in a decrease in the transcription of important genes encoding for neurotrophins. In addition, several authors proposed that pAp-phosphatase could be one of the therapeutic targets of lithium. This hypothesis was supported by the low Ki of lithium for human pAp-phosphatase compatible within the range of therapeutic concentrations of lithium in the plasma of people (0.8–1 mM). The Ki of human pAp-phosphatase is ten times lower than that of GSK3β (glycogen synthase kinase 3β). Inhibition of pAp-phosphatase by lithium leads to increased levels of pAp (3′-5′ phosphoadenosine phosphate), which was shown to inhibit PARP-1.
Another mechanism proposed in 2007 is that lithium may interact with nitric oxide (NO) signalling pathway in the central nervous system, which plays a crucial role in neural plasticity. The NO system could be involved in the antidepressant effect of lithium in the Porsolt forced swimming test in mice. It was also reported that NMDA receptor blockage augments antidepressant-like effects of lithium in the mouse forced swimming test, indicating the possible involvement of NMDA receptor/NO signaling in the action of lithium in this animal model of learned helplessness.
Lithium possesses neuroprotective properties by preventing apoptosis and increasing cell longevity.
Although the search for a novel lithium-specific receptor is ongoing, the high concentration of lithium compounds required to elicit a significant pharmacological effect leads mainstream researchers to believe that the existence of such a receptor is unlikely.