Many findings implicating prefrontal cortical and limbic areas of the brain and endocrine systems in the neuropathology and pathophysiology of bipolar illness have greatly increased our understanding of the neurobiology of the illness. New imaging techniques such as PET, MRI, SPECT, and MRS have detailed more evidence of specific regional alterations in the brains of bipolar patients than was thought possible just 20 years ago. These methods are beginning to be used to help predict response to treatment. Examining the mechanisms of action of mood stabilizers (such as lithium, carbamazepine, and valproate) has provided clues to potential underlying neurobiological abnormalities in the illness. Recent studies of postmortem brain tissue have begun to confirm prefrontal cortical and limbic neurochemical and microstructural alterations in patients with bipolar illness compared with controls. It is postulated that it is the balance between primary pathological versus secondary adaptive alterations in gene expression in the illness and their enhancement or dampening by pharmacotherapy, that may determine the episodic course of mood fluctuations and remissions. Further examination of the pathophysiology and neurobiology of bipolar illness should lead to both more effective treatments and, potentially, secondary and even primary episode prevention.