Lipids have many important yet distinct functions in cellular homeostasis such as forming an impermeable barrier separating intracellular and extracellular compartments, providing a matrix for the appropriate interactions of membrane-associated proteins, and serving as storage reservoirs for biologically active second messengers. Alterations in cellular lipids may therefore result in abnormal cellular functions. This review summarizes the results from the examination of lipid alterations in Alzheimer's disease (AD). In addition to the effects of cholesterol on AD, substantial depletions of plasmalogen and sulfatide as well as dramatic increases in ceramide are specifically manifested at the earliest clinically recognizable stage of AD. The potential mechanism(s) underlying these changes and the potential consequences of these changes in neuronal function and in AD development are also discussed. Collectively, this review will provide an overview of the lipid alterations in Alzheimer's disease and the relationship of these lipid alterations with the development of AD pathogenesis.