The biosynthesis of lipids in the mycelium and sporophore of Pleurotus sajor caju was studied. Whereas in the mycelium the biosynthesis of lipids was directly primarily towards storage (e.g. tri-acylglycerols), in the sporophore it was directed towards structural components (e.g. sterols). The incorporation of I4C precursors into non-polar and polar lipid fractions was generally similar for I4C acetate, 14C palmitate, 14C oleate and I4C linoleate in the case of mycelium and sporophore. It appears that linoleic acid was utilised as a source of acetate for lipid biosynthesis in the sporophore. A significantly higher incorporation of label was seen in sporophore sterol than in mycelial sterol. Malate dehydrogenase activity increased in the mycelium grown in the presence of lipids. Lipase of P. sajor caju was inducive. The growth of P. sajor caju was enhanced by increased lipid utilisation. The implications of these results on commercial cultivation of this fungus are discussed.