The lateral habenula (LHb) is an epithalamic region with a crucial role in the regulation of midbrain monoaminergic systems. Over the past few years a renewed interest in the LHb has emerged due to studies highlighting its central role in encoding rewarding and aversive aspects of stimuli. Moreover, an increasing number of functional as well as behavioral indications provide substantial evidence supporting a role of LHb in neuropsychiatric diseases, including mood disorders and drug addiction. Cellular and synaptic adaptations in the LHb may therefore represent a critical phenomenon in the etiology of these diseases. In the current review we describe the anatomical and functional connections allowing the LHb to control the dopamine and serotonin systems, as well as possible roles of these connections in motivated behaviors and neuropsychiatric disorders. Finally, we discuss how drug exposure and stressful conditions alter the cellular physiology of the LHb, highlighting a role for the LHb in the context of drug addiction and depression.