Lithium salts are the most effective agents used in treating manic-depressive illness. It has been suggested that lithium's therapeutic efficacy could be due to an inhibitory effect on either inositol phospholipid (IP) and/or cyclic nucleotide metabolism. We have investigated the effect of lithium on these two signal transduction pathways in PC12 pheochromocytoma cells by studying a common effector target, expression of the fos protooncogene. We find that lithium, at therapeutic doses, has an augmenting effect on phosphatidylinositol (PI)-mediated fos expression induced by activating a muscarinic cholinergic pathway, whereas it has no effect, at tenfold the therapeutic dose, on fos expression induced by receptor or postreceptor activators of cyclic adenosine monophosphate (cAMP). The lithium augmenting effect is also observed when the cells are treated with phorbol esters, which directly activate protein kinase C (PKC), suggesting that the level of lithium's interaction with the IP pathway is at the postreceptor level. We also show that phorbol esters induce extensive down regulation of subsequent cholinergic and phorbol ester responsiveness as well as heterologous down regulation of cAMP responses. Treatment of down-regulated cells with lithium leads to an enhanced responsiveness when cells are rechallenged with agonists that activate PKC but not by agonists that stimulate cAMP. We also show that carbamazepine, another antimanic agent, has an inhibitory effect on cAMP-mediated fos but no effect on the IP pathway. The opposite effects of lithium and carbamazepine on two critical transducing systems suggest a model for the antimanic action of these agents.