It has been proposed that lithium's antimanic action is due to an effect on phosphoinositide metabolism. Second messengers generated by this pathway regulate calcium mobilization and the activity of the serine and threonine kinase, protein kinase C (PKC). Included among the targets of PKC is activation of fos protooncogene expression, a well-established component of the AP-1 transcription factor. Because of these interactions, we investigated the effect of lithium on fos gene expression in PC12 pheochromocytoma cells. We find that lithium increases the level of fos mRNA that occurs in response to receptor and postreceptor activation of PKC. Treatment with lithium also leads to an augmentation of muscarinic cholinergic-mediated fos gene expression in cells that are down-regulated as a result of excessive cholinergic stimulation. The ability of lithium to enhance the response of a down-regulated cholinergic system suggests a model for its therapeutic efficacy in affective disorders.