Modification of pigmentation and damage of melanocytes are characteristic features of skin colonisation of Pityrosporum orbiculare hyphae in pityriasis versicolor (PV). The yeast is lipophylic and lipid-dependent, capable of oxidising unsaturated lipid components of skin surface, i.e., unsaturated fatty acids, cholesterol and squalene (SQ). The oxidation of unsaturated fatty acids gives rise to dicarboxylic acids (DA) which behave, in vitro, as competitive inhibitors of tyrosinase. In this work, we further investigate the oxidase activity of Pityrosporum in vitro, by evaluating (a) the generation of lipoperoxides in cultures supplemented with fatty acids at various degrees of unsaturation; (b) the mechanism of SQ oxidation; (c) the chemical characteristics of some by-products of lipoperoxidation; (d) the formation of peroxisomes in fungal cells. In cultures supplemented with the saturated palmitic acid (C16:0) and monounsaturated oleic acid (C18:1 n-9), low amounts of lipoperoxides were detected by a spectrophotometric test, whereas in cultures supplemented with di-unsaturated linoleic acid (C18:2 n-6), significant concentrations were found. Gas chromatography-mass spectrometry analyses showed the generation of linoleic acid hydroperoxides both in Pityrosporum cultures and following incubation of acetone powder of the fungus with the unsaturated fatty acid, indicating the presence of a lipoxygenase activity in the fungus. In cultures supplemented with linoleic acid plus SQ, and increase of lipoperoxide generation was observed and trans-trans farnesal and squalene epoxides have been identified. Electron microscopic examinations have evidenced peroxisomes in cells grown in the presence of linoleic acid, whereas they were not detected in cultures supplemented with oleic acid and palmitic acid. The metabolic activities of peroxisomes, through the formation of hydrogen peroxide and the subsequent generation of hydroxyl radicals, may account for the peroxidation of SQ, which is not a substrate of lipoxygenase. Following these results, we propose a mechanism for DA generation by Pityrosporum metabolism and hypothesize that the lipoperoxidation process induced by lipoxygenase activity of the fungus may be the key to understanding the clinical appearance of skin manifestation of PV.