The yeast Saccharomyces cerevisiae is a powerful experimental system to study biochemical, cell biological and molecular biological aspects of lipid synthesis. Most but not all genes encoding enzymes involved in fatty acid, phospholipid, sterol or sphingolipid biosynthesis of this unicellular eukaryote have been cloned, and many gene products have been functionally characterized. Less information is available about genes and gene products governing the transport of lipids between organelles and within membranes, turnover and degradation of complex lipids, regulation of lipid biosynthesis, and linkage of lipid metabolism to other cellular processes. Here we summarize current knowledge about lipid biosynthetic pathways in S. cerevisiae and describe the characteristic features of the gene products involved. We focus on recent discoveries in these fields and address questions on the regulation of lipid synthesis, subcellular localization of lipid biosynthetic steps, cross-talk between organelles during lipid synthesis and subcellular distribution of lipids. Finally, we discuss distinct functions of certain key lipids and their possible roles in cellular processes.