Varenicline is a promising agent with demonstrated efficacy in the promotion of smoking cessation. However, from the time of initial trials, it has been associated with significant psychiatric adverse effects. We describe a case where mixed mood and psychotic disturbance developed in an individual with a history of depression and a family history of bipolar disorder. Based on this case, we hypothesize a possible mechanism of action for these adverse effects and preventive measures that could be undertaken in its effective use.