Highly potent, but poorly water-soluble, drug candidates are common outcomes of contemporary drug discovery programmes and present a number of challenges to drug development — most notably, the issue of reduced systemic exposure after oral administration. However, it is increasingly apparent that formulations containing natural and/or synthetic lipids present a viable means for enhancing the oral bioavailability of some poorly water-soluble, highly lipophilic drugs. This Review details the mechanisms by which lipids and lipidic excipients affect the oral absorption of lipophilic drugs and provides a perspective on the possible future applications of lipid-based delivery systems. Particular emphasis has been placed on the capacity of lipids to enhance drug solubilization in the intestinal milieu, recruit intestinal lymphatic drug transport (and thereby reduce first-pass drug metabolism) and alter enterocyte-based drug transport and disposition.