There has been increasing interest in the lateral habenula (LHb) given its potent regulatory role in many aversion-related behaviors. Interestingly, ethanol can be rewarding as well as aversive; we therefore investigated whether ethanol exposure alters pacemaker firing or glutamate receptor signaling in LHb neurons in vitro and also whether LHb activity in vivo might contribute to the acquisition of conditioned place aversion to ethanol. Surprisingly, in epithalamic slices, low doses of ethanol (1.4 mM) strongly accelerated LHb neuron firing (by ~60%), and ethanol's effects were much reduced by blocking glutamate receptors. Ethanol increased presynaptic glutamate release, and about half of this effect was mediated by dopamine subtype 1 receptors (D1Rs) and cyclic adenosine monophosphate (cAMP)-dependent signaling pathways. In agreement with these findings, c-Fos immunoreactivity in LHb regions was enhanced after a single administration of a low dose of ethanol (0.25 g/kg i.p.). Importantly, the same dose of ethanol in vivo also produced strong conditioned place aversion, and this was prevented by inhibiting D1Rs or neuronal activity within the LHb. By contrast, a higher dose (2 g/kg) led to ethanol conditioned place preference, which was enhanced by inhibiting neuronal activity or D1Rs within the LHb and suppressed by infusing aminomethylphosphonic acid or the D1R agonist SKF38393 within the LHb. Our in vitro and in vivo observations show, for the first time, that ethanol increases LHb excitation, mediated by D1R and glutamate receptors, and may underlie a LHb aversive signal that contributes to ethanol-related aversion.