Exposing eukaryotic cells to lithium ions (Li+) during development has marked effects on cell fate and organization. The phenotypic consequences of Li+ treatment on Xenopus embryos and sporulating Dictyostelium are similar to the effects of inhibition or disruption, respectively, of a highly conserved protein serine/threonine kinase, glycogen synthase kinase-3 (GSK-3). In Drosophila, the GSK-3 homologue is encoded by zw3sgg, a segment-polarity gene involved in embryogenesis that acts downstream of wg. In higher eukaryotes, GSK-3 has been implicated in signal transduction pathways downstream of phosphoinositide 3-kinase and mitogen-activated protein kinases. We investigated the effect of Li+ on the activity of the GSK-3 family. At physiological doses, Li+ inhibits the activity of human GSK-3 beta and Drosophila Zw3Sgg, but has no effect on other protein kinases. The effect of Li+ on GSK-3 is reversible in vitro. Treatment of cells with Li+ inhibits GSK-3-dependent phosphorylation of the microtubule-associated protein Tau. Li+ treatment of Drosophila S2 cells and rat PC12 cells induces accumulation of cytoplasmic Armadillo/beta-catenin, demonstrating that Li+ can mimic Wingless signalling in intact cells, consistent with its inhibition of GSK-3. Li+ acts as a specific inhibitor of the GSK-3 family of protein kinases in vitro and in intact cells, and mimics Wingless signalling. This reveals a possible molecular mechanism of Li+ action on development and differentiation.