Epidermal lipids play important roles in cell structure, in control of growth and differentiation, in determining cohesion and desquamation, and in formation and function of a permeability barrier. Knowledge of the structures and composition of the epidermal lipids is important for understanding these functions. The lipids present in epidermis include phospholipids, monohexosylceramides, ceramides, cholesterol, cholesterol esters, cholesterol sulfate, triglycerides, and fatty acids. The phospholipids are major structural components of the plasma membranes and membranous organelles in the viable and differentiating keratinocytes. In addition, phospholipids serve in several transmembranal signaling processes and as a reservoir for arachidonic acid, the precursor of the eicosanoids. Monohexosylceramides are thought to function in the assembly of lamellar bodies, and in the final stage of differentiation are converted to a structurally heterogenous mixture of ceramides in the intercellular space of the stratum corneum and to a unique ceramide covalently attached to the corneocyte surface. The mixture of lipids in the stratum corneum, composed principally of ceramides, cholesterol, cholesterol esters, and fatty acids, prevents desiccation and limits the penetration of a variety of noxious environmental agents. The stratum corneum lipids represent a major product of epidermal differentiation, and free sphingosine liberated from ceramides in this terminally differentiated compartment may provide a feedback mechanism for the regulation of the differentiation process.