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 β-amyloid peptide (Aβ) 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 GSK3β is a potential downstream kinase, which modulates APP processing because inhibition of GSK3 activity by either a dominant negative GSK3β kinase-deficient construct or GSK3β antisense oligonucleotide mimics lithium and VPA effects. Moreover, lithium treatment abolished GSK3β-mediated Aβ increase in the brains of GSK3β transgenics and reduced plaque burden in the brains of the PDAPP (APP_V717F) transgenic mice.