Background: Bipolar disorder is characterized by cyclical alternation between mania and depression, often comorbid with psychosis and suicide. Compared with other medications, the mood stabilizer lithium is the most effective treatment for the prevention of manic and depressive episodes. However, the pathophysiology of bipolar disorder and lithium’s mode of action are yet to be fully understood. Evidence suggests a change in the balance of excitatory and inhibitory activity, favouring excitation in bipolar disorder. In the present study, we sought to establish a holistic understanding of the neuronal consequences of lithium exposure in mouse cortical neurons, and to identify underlying mechanisms of action. Methods: We used a range of technical approaches to determine the effects of acute and chronic lithium treatment on mature mouse cortical neurons. We combined RNA screening and biochemical and electrophysiological approaches with confocal immunofluorescence and live-cell calcium imaging. Results: We found that only chronic lithium treatment significantly reduced intracellular calcium flux, specifically by activating metabotropic glutamatergic receptor 5. This was associated with altered phosphorylation of protein kinase C and glycogen synthase kinase 3, reduced neuronal excitability and several alterations to synapse function. Consequently, lithium treatment shifts the excitatory–inhibitory balance toward inhibition. Limitations: The mechanisms we identified should be validated in future by similar experiments in whole animals and human neurons. Conclusion: Together, the results revealed how lithium dampens neuronal excitability and the activity of the glutamatergic network, both of which are predicted to be overactive in the manic phase of bipolar disorder. Our working model of lithium action enables the development of targeted strategies to restore the balance of overactive networks, mimicking the therapeutic benefits of lithium but with reduced toxicity.