The lipid A domain of lipopolysaccharide (LPS) is a unique, glucosamine‐based phospholipid that makes up the outer monolayer of the outer membrane of most gram‐negative bacteria. Because of its profound pharmacological effects on animal cells, especially those of the immune system, lipid A is also known as endotoxin. Despite decades of earlier work, the precise chemistry of endotoxins and the biochemical pathways for their enzymatic synthesis have been elucidated only within the past 5 years. In this review, we summarize the essentials of endotoxin biochemistry and also present recent experiments aimed at identifying surface receptors, signal‐transducing elements, transcriptional factors, and key intracellular targets involved in the response of animal cells to endotoxins.—Raetz, C. R. H.; Ulevitch, R. J.; Wright, S. D.; Sibley, C. H.; Ding, A.; Nathan, C. F. Gram‐negative endotoxin: an extraordinary lipid with profound effects on eukaryotic signal transduction. FASEB J. 5: 2652‐2660; 1991.