Bipolar disorder has a major deleterious impact on many aspects of a patient's functioning and health-related quality of life. Although the formal measurement of these deficits has been neglected until recently, many well-designed trials now include an assessment of functioning and health-related quality of life using one or more rating scales. This review describes recent developments in the measurement of functioning and health-related quality of life in bipolar disorder, and discusses the evidence that medications that improve symptoms in bipolar disorder also offer clinically relevant benefits in functioning and health-related quality of life. Direct comparisons of the benefits of medications including atypical antipsychotics are problematic due to differences in trial populations, study durations and rating scales. Data from quetiapine trials indicate that this medication offers prompt and sustained improvement of functioning in patients with mania and enhancement of health-related quality of life in patients with bipolar depression, to accompany the significant improvements in mood episodes.