The long-chain base phytosphingosine is a component of sphingolipids and exists in yeast, plants and some mammalian tissues. Phytosphingosine is unique in that it possesses an additional hydroxyl group compared with other long-chain bases. However, its metabolism is unknown. Here we show that phytosphingosine is metabolized to odd-numbered fatty acids and is incorporated into glycerophospholipids both in yeast and mammalian cells. Disruption of the yeast gene encoding long-chain base 1-phosphate lyase, which catalyzes the committed step in the metabolism of phytosphingosine to glycerophospholipids, causes an ~40% reduction in the level of phosphatidylcholines that contain a C15 fatty acid. We also find that 2-hydroxypalmitic acid is an intermediate of the phytosphingosine metabolic pathway. Furthermore, we show that the yeast MPO1 gene, whose product belongs to a large, conserved protein family of unknown function, is involved in phytosphingosine metabolism. Our findings provide insights into fatty acid diversity and identify a pathway by which hydroxyl group-containing lipids are metabolized.