Lithium is the first choice drug for the long-term prophylaxis of depressive and manic episodes in bipolar disorder (BD). Both experimental and clinical studies show either neuroprotective or neurotoxic effects of lithium on brain function, reflecting the propensity of lithium to affect different brain structures. In most experimental studies, lithium, in therapeutic doses, exerts a favourable influence on various cognitive functions. Patients with BD present cognitive problems of mild intensity across mood states, worsening during manic or depressive episodes and, sometimes, also persisting during euthymia. Meta-analyses, comparing bipolar patients treated with lithium with those without the drug show a moderate negative effect of this drug on cognition and, among clinicians, negative impact on cognitive functioning is considered one of the side effect of the drug. In some studies, the effect of lithium on cognitive function in BD was shown to be associated with a prophylactic efficacy of the drug against an occurrence of affective episodes. Excellent lithium responders, having no affective recurrences during lithium therapy, perform on cognitive functions tests similar to those of age-matched, healthy control subjects. Some studies also found a reduction by lithium the risk of dementia in BD subjects. Possible mechanisms alleviating negative impact of lithium on cognition in BD can be connected with the prevention of affective recurrences, improvement of neural plasticity, antiviral action against herpes infection and using the drug in appropriate doses.