Somatic cells can be reprogrammed into induced pluripotent stem cells (iPSCs) by defined factors. The low efficiency of reprogramming and genomic integration of oncogenes and viral vectors limited the potential application of iPSCs. Here we report that Lithium (Li), a drug used to treat mood disorders, greatly enhances iPSC generation from both mouse embryonic fibroblast and human umbilical vein endothelial cells. Li facilitates iPSC generation with one (Oct4) or two factors (OS or OK). The effect of Li on promoting reprogramming only partially depends on its major target GSK3β. Unlike other GSK3β inhibitors, Li not only increases the expression of Nanog, but also enhances the transcriptional activity of Nanog. We also found that Li exerts its effect by promoting epigenetic modifications via downregulation of LSD1, a H3K4-specific histone demethylase. Knocking down LSD1 partially mimics Li's effect in enhancing reprogramming. Our results not only provide a straightforward method to improve the iPSC generation efficiency, but also identified a histone demethylase as a critical modulator for somatic cell reprogramming.