Lithium is one of the most widely used mood-stabilizing agents for the treatment of bipolar disorder. Although the underlying mechanism(s) of this mood stabilizer remains controversial, recent evidence linking lithium to neurotrophic/neuroprotective effects (Choi and Sung (2000) 1475, 225-230; Davies et al. (2000) 351, 95-105) suggests novel benefits of this drug in addition to mood stabilization. Here, we report that both lithium as well as valproic acid (VPA) inhibit beta-amyloid peptide (Abeta) production in HEK293 cells stably transfected with Swedish amyloid precursor protein (APP)(751) and in the brains of the PDAPP (APP(V717F)) Alzheimer's disease transgenic mouse model at clinically relevant plasma concentrations. Both lithium and VPA are known to be glycogen synthase kinase-3 (GSK3) inhibitors. Our studies reveal that GSK3beta is a potential downstream kinase, which modulates APP processing because inhibition of GSK3 activity by either a dominant negative GSK3beta kinase-deficient construct or GSK3beta antisense oligonucleotide mimics lithium and VPA effects. Moreover, lithium treatment abolished GSK3beta-mediated Abeta increase in the brains of GSK3beta transgenics and reduced plaque burden in the brains of the PDAPP (APP(V717F)) transgenic mice.