Dandruff and seborrheic dermatitis (D/SD) share an etiology dependent upon three factors: sebum, microbial metabolism (specifically, Malassezia yeasts), and individual susceptibility. Advances in microbiological and analytical techniques permit a more detailed understanding of these etiologic factors, especially the role of Malassezia. Malassezia are lipid-dependent and demonstrate adaptation allowing them to exploit a narrow niche on sebum-rich skin. Work in our and our collaborators' laboratories has focused on understanding these adaptations by detailed analysis of biochemistry and gene expression. We have shown that Malassezia globosa and M. restricta predominate on dandruff scalp, that oleic acid alone can initiate dandruff-like desquamation, that M. globosa is the most likely initiating organism by virtue of its high lipase activity, and that an M. globosa lipase is expressed on human scalp. Considering the importance of M. globosa in D/SD (and the overall importance of commensal fungi), we have sequenced the M. globosa and M. restricta genomes. Genomic analysis indicates key adaptations to the skin environment, several of which yield important clues to the role Malassezia play in human disease. This work offers the promise of defining new treatments to D/SD that are targeted at changing the level or activities of Malassezia genes.