Drugs with low aqueous solubility commonly show low and erratic absorption after oral administration. Myriad approaches have therefore been developed to promote drug solubilization in the gastrointestinal (GI) fluids. Here, we offer insight into the unique manner by which lipid-based formulations (LBFs) may enhance the absorption of poorly water-soluble drugs via co-stimulation of solubilization and supersaturation. Supersaturation provides an opportunity to generate drug concentrations in the GI tract that are in excess of the equilibrium crystalline solubility and therefore higher than that achievable with traditional formulations. Incorporation of LBF into lipid digestion and absorption pathways provides multiple drivers of supersaturation generation and the potential to enhance thermodynamic activity and absorption. These drivers include 1) formulation dispersion, 2) lipid digestion, 3) interaction with bile and 4) lipid absorption. However, high supersaturation ratios may also stimulate drug precipitation and reduce exposure where re-dissolution limits absorption. The most effective formulations are likely to be those that generate moderate supersaturation and do so close to the site of absorption. LBFs are particularly well suited to these criteria since solubilization protects against high supersaturation ratios, and supersaturation initiation typically occurs in the small intestine, at the absorptive membrane.