The affective variability of bipolar disorder (BD) is thought to qualitatively differ from that of borderline personality disorder (BPD), with changes in affect persisting longer in BD. However, quantitative studies have not been able to confirm this distinction. It has therefore not been possible to accurately quantify how treatments like lithium influence affective variability in BD. We assessed the affective variability associated with BD and BPD as well as the effect of lithium using a computational model that defines two subtypes of variability: affective changes that persist (volatility) and changes that do not (noise). We hypothesized that affective volatility would be raised in the BD group, noise would be raised in the BPD group, and that lithium would impact affective volatility. Daily affect ratings were prospectively collected for up to 3 y from patients with BD or BPD and nonclinical controls. In a separate experimental medicine study, patients with BD were randomized to receive lithium or placebo, with affect ratings collected from week -2 to +4. We found a diagnostically specific pattern of affective variability. Affective volatility was raised in patients with BD, whereas affective noise was raised in patients with BPD. Rather than suppressing affective variability, lithium increased the volatility of positive affect in both studies. These results provide a quantitative measure of the affective variability associated with BD and BPD. They suggest a mechanism of action for lithium, whereby periods of persistently low or high affect are avoided by increasing the volatility of affective responses.