The increasing knowledge concerning anatomical structures and cellular processes underlying event-related potentials (ERP) as well as methodological advances in ERP data analysis (e.g. dipole source analysis) begin to bridge the gap between ERP and neurochemical aspects. Reliable indicators of the serotonin system are urgently needed because of its role in pathophysiology and as target of pharmacotherapeutic interventions in psychiatric disorders. Converging arguments from preclinical and clinical studies support the hypothesis that the loudness dependence of the auditory evoked N1/P2-response (LDAEP) is regulated by the level of central serotonergic neurotransmission. Dipole source analysis represents an important methodological advance in this context, because the two N1/P2-subcomponents, generated by the primary and secondary auditory cortex known to be differentially innervated by serotonergic fibers, can be separated. A pronounced LDAEP of primary auditory cortices is supposed to reflect low central serotonergic neurotransmission, and vice versa. LDAEP is a parameter with potential clinical value since subgroups of patients with a serotonergic dysfunction can be identified and can be treated more specifically. In depressed patients, a significant relationship between strong LDAEP, indicating low serotonergic function, and a favorable response to SSRI has been found. Additionally, there is evidence from several studies with patients with affective disorders implicating a strong LDAEP as a predictor of favorable response to a preventive lithium treatment.