Lithium is an efficacious agent for the treatment of bipolar disorder, but it is unclear to what extent its long-term use may result in neuroprotective or toxic consequences. Medline was searched with the combination of the word ‘Lithium’ plus key words that referred to every possible effect on the central nervous system. The papers were further classified into those supporting a neuroprotective effect, those in favour of a neurotoxic effect and those that were neutral. The papers were classified into research in humans, animal and in-vitro research, case reports, and review/opinion articles. Finally, the Natural Standard evidence-based validated grading rationale was used to validate the data. The Medline search returned 970 papers up to February 2006. Inspection of the abstracts supplied 214 papers for further reviewing. Eighty-nine papers supported the neuroprotective effect (6 human research, 58 animal/in vitro, 0 case reports, 25 review/opinion articles). A total of 116 papers supported the neurotoxic effect (17 human research, 23 animal/in vitro, 60 case reports, 16 review/opinion articles). Nine papers supported no hypothesis (5 human research, 3 animal/in vitro, 0 case reports, 1 review/opinion articles). Overall, the grading suggests that the data concerning the effect of lithium therapy is that of level C, that is ‘unclear or conflicting scientific evidence’ since there is conflicting evidence from uncontrolled non-randomized studies accompanied by conflicting evidence from animal and basic science studies. Although more papers are in favour of the toxic effect, the great difference in the type of papers that support either hypothesis, along with publication bias and methodological issues make conclusions difficult. Lithium remains the ‘gold standard’ for the prophylaxis of bipolar illness, however, our review suggests that there is a rare possibility of a neurotoxic effect in real-life clinical practice even in closely monitored patients with ‘therapeutic’ lithium plasma levels. It is desirable to keep lithium blood levels as low as feasible with prophylaxis.