Archaeal membrane lipid composition is distinct from Bacteria and Eukarya, consisting of isoprenoid chains etherified to the glycerol carbons. Biosynthesis of these lipids is poorly understood. Here we identify and characterize the archaeal membrane protein CDP-archaeol synthase (CarS) that catalyzes the transfer of the nucleotide to its specific archaeal lipid substrate, leading to the formation of a CDP-activated precursor (CDP-archaeol) to which polar head groups are attached. The discovery of CarS enabled reconstitution of the entire archaeal lipid biosynthesis pathway in vitro, starting from simple isoprenoid building blocks and using a set of five purified enzymes. The cell free synthetic strategy for archaeal lipids we describe opens opportunity for studies of archaeal lipid biochemistry. Additionally, insights into archaeal lipid biosynthesis reported here allow addressing the evolutionary hypothesis of the lipid divide between Archaea and Bacteria.