Lithium (Li) is widely used as a mood stabilizer to treat bipolar affective disorder. However, the molecular targets of Li that underpin its therapeutic effect remain unresolved. Inositol monophosphatase (IMPA1) is an enzyme involved in phosphatidylinositol 4,5-bisphosphate (PIP₂) resynthesis after PLC signaling. In vitro, Li inhibits IMPA1, but the relevance of this inhibition within neural cells remains unknown. Here, we report that treatment with therapeutic concentrations of Li reduces receptor-activated calcium release from intracellular stores and delays PIP₂ resynthesis. These effects of Li are abrogated in IMPA1 deleted cells. We also observed that in human forebrain cortical neurons, treatment with Li reduced neuronal excitability and calcium signals. After Li treatment of human cortical neurons, transcriptome analyses revealed down-regulation of signaling by glutamate, a key excitatory neurotransmitter in the human brain. Collectively, our findings suggest that inhibition of IMPA1 by Li reduces receptor-activated PLC signaling and neuronal excitability.