ABSTRACT Bipolar disorder (BD) is characterized by cyclical alternations between mania and depression, often comorbid with psychosis, and suicide. The mood stabilizer lithium, compared to other medications, is the most efficient treatment for prevention of manic and depressive episodes. The pathophysiology of BD, and lithium’s mode of action, are yet to be fully understood. Evidence suggests a change in the balance of excitatory/inhibitory activity, favouring excitation in BD. Here, we sought to establish a holistic appreciation of the neuronal consequences of lithium exposure in mouse cortical neurons and identify underlying mechanisms. We found that chronic (but not acute) lithium treatment significantly reduced intracellular calcium flux, specifically through the activation of the metabotropic glutamatergic receptor mGluR5. This was associated with altered phosphorylation of PKC and GSK3 kinases, reduced neuronal excitability, and several alterations to synapse function. Consequently, lithium treatment shifts the excitatory/inhibitory balance in the network toward inhibition. Together, the results revealed how lithium dampens neuronal excitability and glutamatergic network activity, which are predicted to be overactive in the manic phase of BD. 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.