Dietary lipids are key for infants to not only meet their high energy needs but also fulfill numerous metabolic and physiological functions critical to their growth, development, and health. The lipid composition of breast milk varies during lactation and according to the mother's diet, whereas the lipid composition of infant formulae varies according to the blend of different fat sources. This report compares the compositions of lipids in breast milk and infant formulae, and highlights the roles of dietary lipids in term and preterm infants and their potential biological and health effects. The major differences between breast milk and formulae lie in a variety of saturated fatty acids (such as palmitic acid, including its structural position) and unsaturated fatty acids (including arachidonic acid and docosahexaenoic acid), cholesterol, and complex lipids. The functional outcomes of these differences during infancy and for later child and adult life are still largely unknown, and some of them are discussed, but there is consensus that opportunities exist for improvements in the qualitative lipid supply to infants through the mother's diet or infant formulae. Furthermore, research is required in several areas, including the needs of term and preterm infants for long-chain polyunsaturated fatty acids, the sites of action and clinical effects of lipid mediators on immunity and inflammation, the role of lipids on metabolic, neurological, and immunological outcomes, and the mechanisms by which lipids act on short- and long-term health.