Clay weathering in shales is an important component of the global Li budget because Li is mobilized from Li-rich clay minerals and shale represents about one quarter of the exposed rocks on Earth. We investigate Li isotopes and concentrations to explore implications and mechanisms of Li isotopic fractionation in Shale Hills, a first-order catchment developed entirely on shale in a temperate climate in the Appalachian Mountains, northeastern USA. The Li isotopic compositions (δ7Li) of aqueous Li in stream water and groundwater vary between 14.5 and 40.0‰. This range is more than half that observed in rivers globally. The δ7Li of aqueous Li increases with increasing Li retention in secondary minerals, which is simulated using a box model that considers pore fluid advection to be the dominant transport process, silicate dissolution to be the source of Li to the pore fluid, and uptake of Li by kaolinite, Fe-oxides, and interlayer sites of clays to be the sinks. The simulations suggest that only those deep groundwaters with δ7Li values of ∼15‰ are explainable as steady state values; those fluids with δ7Li values > 18‰, especially near-surface waters, can only be explained as time-dependent, transient signals in an evolving system. Lithium is highly retained in the residual solid phase during chemical weathering; however, bulk soils (0.5 ± 1.2‰ (1 SD)) and stream sediments (0.3‰) have similar, or higher, δ7Li values compared to average bedrock (−2.0‰). This is attributed to preferential removal of clay particles from soils. Soil clays are isotopically depleted in 7Li (δ7Li values down to −5.2‰) compared to parental material, and δ7Li values correlate with soil Li concentration, soil pH, and availability of exchangeable sites for Li as a function of landscape position (valley floor versus ridge top). The strong depletion of Li and clay minerals in soils compared to bedrock is attributed at least partly to loss of Li through export of fine-grained clay particles in subsurface water flow. This process might be enhanced as the upper weathering zone of this catchment is highly fractured due to former periglacial conditions. The Li isotopic composition of vegetation is similar to soil clay and both are distinct from mobile catchment water (soil pore water, stream and groundwater). Extrapolating from this catchment means that subsurface particle loss from shales could be significant today and in the past, affecting isotopic signatures of soils and water. For example, clay transformations together with removal of clay particles before re-dissolution support weathering conditions that lead to a low aqueous Li flux but to high δ7Li values in water.