Apical and basolateral membrane domains of epithelial cell plasma membranes possess unique lipid compositions. The tight junction, the structure separating the two domains, forms a diffusion barrier for membrane components and thereby prevents intermixing of the two sets of lipids. The barrier apparently resides in the outer, exoplasmic leaflet of the plasma membrane bilayer. First data are now available on the generation of these differences in Madin-Darby canine kidney (MDCK) cells, grown on filter supports. Experiments in which fluorescent precursors of apical lipids were introduced into the cell have demonstrated that upon biosynthesis apical lipids are sorted from basolateral lipids in an intracellular compartment. In this paper we present a model for the sorting process, the central point of which is that the two sets of lipids laterally segregate into microdomains that bud to form vesicles delivering the lipids to the apical and the basolateral plasma membrane domains, respectively.