Bipolar disorder (BD) and alcohol dependence (AD) frequently co-occur, and co-occurring BD and AD are associated with devastating public health costs. Minimal neurobiological research exists to guide the development of effective treatments for this treatment-resistant population. We believe the present study represents the first investigation of prefrontal gamma-aminobutyric acid (GABA) and glutamate levels in co-occurring BD and current AD. The participants were 78 individuals who met DSM-IV criteria for BD I/II and current AD (n=20), BD I/II alone (n=19), current AD alone (n=20) or no diagnosis (n=19). The participants completed a baseline diagnostic visit, then returned approximately 4 days later for a two-dimensional J-resolved proton magnetic resonance spectroscopy (1H-MRS) acquisition in dorsal anterior cingulate cortex (dACC). All participants were required to demonstrate ⩾1 week of abstinence from alcohol/drugs via serial biomarker testing before 1H-MRS. A 2 × 2 factorial analysis of variance of cerebrospinal fluid (CSF)-corrected GABA/water concentrations demonstrated a significant BD × AD interaction (F=2.91, P<0.05), signifying uniquely low levels of GABA in BD+AD; this effect doubled when the sample was restricted to individuals who consumed alcohol within 2 weeks of 1H-MRS. There were no overall effects of BD/AD on CSF-corrected glutamate/water levels. However, the BD × AD interaction, signifying uniquely low levels of glutamate in BD+AD, approached statistical significance (F=3.83, P=0.06) in individuals who consumed alcohol within 2 weeks of 1H-MRS. The dACC GABA levels were significantly, negatively associated with Barratt Impulsiveness Scale (r=-0.28, P=0.02) and Obsessive Compulsive Drinking Scale (r=-0.35, P<0.01) scores. If replicated, these results may suggest that future treatment studies should preferentially evaluate therapeutics in BD+AD known to increase prefrontal GABA and glutamate levels.