Abstract Background Since Kraepelin's early distinction between bipolar disorder and schizophrenia, it has been assumed that these disorders represent two different pathophysiological processes, although they share many clinical symptoms. Previous studies showed that velocity discrimination, a sensitive psychophysiological measure of the visual motion system, is deficient in schizophrenia. Here we examined whether the motion processing impairment found in schizophrenia also occurs in bipolar disorder. Methods We compared 16 bipolar patients, 25 schizophrenic patients, and 25 normal controls on a velocity discrimination task. We measured the psychophysical threshold for velocity discrimination and contrast detection (as a control task) in all subjects. Results Bipolar patients showed normal velocity discrimination thresholds at intermediate velocities, the range in which velocity cues dominate velocity discrimination, and at low velocities. Schizophrenic patients, however, showed elevated velocity discrimination thresholds at intermediate and low velocities. At higher velocities, both bipolar and schizophrenic patients showed elevated thresholds. All subjects showed normal contrast detection thresholds. Conclusions Normal velocity discrimination in the intermediate range of velocity indicates unimpaired motion processing in bipolar disorder. The abnormal velocity discrimination of both schizophrenic and bipolar patients at higher velocities may reflect impaired temporal processing rather than impaired motion processing per se. These results suggest that the pathophysiological processes of bipolar disorder and schizophrenia diverge at the stage of visual motion processing, a sensory component mediated primarily in the extrastriate cortex.