Astrocytes are multifunctional glial cells that play essential roles in supporting synaptic signalling and white matter-associated connectivity. There is increasing evidence that astrocyte dysfunction is involved in several brain disorders, including bipolar disorder (BD), depression and schizophrenia. The mood stabiliser lithium is a frontline treatment for BD, but the mechanisms of action remain unclear. Here, we demonstrate that astrocytes are direct targets of lithium and identify unique astroglial transcriptional networks that regulate specific molecular changes in astrocytes associated with BD and schizophrenia, together with Alzheimer’s disease (AD). Using pharmacogenomic analyses, we identified novel roles for the extracellular matrix (ECM) regulatory enzyme lysyl oxidase (LOX) and peroxisome proliferator-activated receptor gamma (PPAR-γ) as profound regulators of astrocyte morphogenesis. This study unravels new pathophysiological mechanisms in astrocytes that have potential as novel biomarkers and potential therapeutic targets for regulating astroglial responses in diverse neurological disorders.