Cade was injecting rodents with urine extracts taken from manic patients in an attempt to isolate a metabolic compound which might be causing mental symptoms. Since uric acid in gout was known to be psychoactive, (adenosine receptors on neurons are stimulated by it; caffeine blocks them), Cade needed soluble urate for a control. He used lithium urate, already known to be the most soluble urate compound, and observed that it caused the rodents to become tranquil. Cade traced the effect to the lithium ion itself, and after ingesting lithium himself to ensure its safety in humans, he proposed lithium salts as tranquilizers. He soon succeeded in controlling mania in chronically hospitalized patients with them. This was one of the first successful applications of a drug to treat mental illness, and it opened the door for the development of medicines for other mental problems in the next decades.The rest of the world was slow to adopt this treatment, largely because of deaths which resulted from even relatively minor overdosing, including those reported from use of lithium chloride as a substitute for table salt. Largely through the research and other efforts of Denmarks Mogens Schou and Paul Baastrup in Europe, and Samuel Gershon and Baron Shopsin in the U.S., this resistance was slowly overcome.
Dopamine and G-protein coupling
During mania, there is an increase in neurotransmission of dopamine that causes a secondary homeostatic down-regulation, resulting in decreased neurotransmission of dopamine, which can cause depression. Additionally, the post-synaptic actions of dopamine are mediated through G-protein coupled receptors. Once dopamine is coupled to the G-protein receptors, it stimulates other secondary messenger systems that modulate neurotransmission. Studies found that in autopsies (which do not necessarily reflect living people), people with bipolar disorder had increased G-protein coupling compared to people without bipolar disorder. Lithium treatment alters the function of certain subunits of the dopamine associated G-protein, which may be part of its mechanism of action. Glutamate and NMDA receptors
Glutamate levels are observed to be elevated during mania. Lithium is thought to provide long-term mood stabilization and have anti-manic properties by modulating glutamate levels. It is proposed that lithium competes with magnesium for binding to NMDA glutamate receptor,  increasing the availability of glutamate in post-synaptic neurons, leading to a homeostatic increase in glutamate re-uptake which reduces glutamatergic transmission. The NMDA receptor is also affected by other neurotransmitters such as serotonin and dopamine. Effects observed appear exclusive to lithium and have not been observed by other monovalent ions such as rubidium and caesium. GABA receptors
GABA is an inhibitory neurotransmitter that plays an important role in regulating dopamine and glutamate neurotransmission. It was found that patients with bipolar disorder had lower GABA levels, which results in excitotoxicity and can cause apoptosis (cell loss).