The Sp4 transcription factor plays a critical role for both development and function of mouse hippocampus. Reduced expression of the mouse Sp4 gene results in a variety of behavioral abnormalities relevant to human psychiatric disorders. The human SP4 gene is therefore examined for its association with both bipolar disorder and schizophrenia in European Caucasian and Chinese populations respectively. Out of ten SNPs selected from human SP4 genomic locus, four displayed significant association with bipolar disorder in European Caucasian families (rs12668354, p = 0.022; rs12673091, p = 0.0005; rs3735440, p = 0.019; rs11974306, p = 0.018). To replicate the genetic association, the same set of SNPs was examined in a Chinese bipolar case control sample. Four SNPs displayed significant association (rs40245, p = 0.009; rs12673091, p = 0.002; rs1018954, p = 0.001; rs3735440, p = 0.029), and two of them (rs12673091, rs3735440) were shared with positive SNPs from European Caucasian families. Considering the genetic overlap between bipolar disorder and schizophrenia, we extended our studies in Chinese trios families for schizophrenia. The SNP7 (rs12673091, p = 0.012) also displayed a significant association. The SNP7 (rs12673091) was therefore significantly associated in all three samples, and shared the same susceptibility allele (A) across all three samples. On the other hand, we found a gene dosage effect for mouse Sp4 gene in the modulation of sensorimotor gating, a putative endophenotype for both schizophrenia and bipolar disorder. The deficient sensorimotor gating in Sp4 hypomorphic mice was partially reversed by the administration of dopamine D2 antagonist or mood stabilizers. Both human genetic and mouse pharmacogenetic studies support Sp4 gene as a susceptibility gene for bipolar disorder or schizophrenia. The studies on the role of Sp4 gene in hippocampal development may provide novel insights for the contribution of hippocampal abnormalities in these psychiatric disorders.