Lithium has been used extensively for mood stabilization, and it is particularly efficacious in the treatment of bipolar mania. Like other drugs used in the treatment of psychiatric diseases, it has little effect on the mood of healthy individuals. Our previous studies found that mice with a mutation in the Clock gene (ClockΔ19) have a complete behavioral profile that is very similar to human mania, which can be reversed with chronic lithium treatment. However, the cellular and physiological effects that underlie its targeted therapeutic efficacy remain unknown. Here we find that ClockΔ19 mice have an increase in dopaminergic activity in the ventral tegmental area (VTA), and that lithium treatment selectively reduces the firing rate in the mutant mice with no effect on activity in wild-type mice. Furthermore, lithium treatment reduces nucleus accumbens (NAc) dopamine levels selectively in the mutant mice. The increased dopaminergic activity in the Clock mutants is associated with cell volume changes in dopamine neurons, which are also rescued by lithium treatment. To determine the role of dopaminergic activity and morphological changes in dopamine neurons in manic-like behavior, we manipulated the excitability of these neurons by overexpressing an inwardly rectifying potassium channel subunit (Kir2.1) selectively in the VTA of ClockΔ19 mice and wild-type mice using viral-mediated gene transfer. Introduction of this channel mimics the effects of lithium treatment on the firing rate of dopamine neurons in ClockΔ19 mice and leads to a similar change in dopamine cell volume. Furthermore, reduction of dopaminergic firing rates in ClockΔ19 animals results in a normalization of locomotor- and anxiety-related behavior that is very similar to lithium treatment; however, it is not sufficient to reverse depression-related behavior. These results suggest that abnormalities in dopamine cell firing and associated morphology underlie alterations in anxiety-related behavior in bipolar mania, and that the therapeutic effects of lithium come from a reversal of these abnormal phenotypes. © 2011 American College of Neuropsychopharmacology. All rights reserved.