The importance of nutrient lipids to the developing preterm and term infant has served to focus investigations upon the mechanisms of fat digestion and absorption. The unique physical-chemical properties of the human milk fat globule have been reviewed. Emphasis is placed on the newer understandings that have emerged concerning the intraluminal phase of triglycerides hydrolysis and solubilization of the lipolytic products. The mechanisms of action of the pancreatic lipase, colipase, and phospholipase A2 system, and the importance of intragastric lipolysis for initiating the lipid digestion are explored. Lastly, aspects of bile acid micelle formation and its role on nutrient lipid solubilization and absorption are examined in view of the postnatal adaptations that occur with weaning and the introduction of alternative nutrient sources to the older infant.