Various oil‐accumulating yeasts were tested for their ability to produce lipase and live on fats and oils as carbon sources. Of these,Candida lipolytica seemed most promising, and the possibility was explored of modifying fats and oils by fermenting them withC. lipolytica and extracting the modified oil deposited in the yeast cells. Oxygen was required for the growth of yeast on fats and oils, but unless the oxygen level was controlled at a low value after cell populations peaked, most of the substrate oil was converted to citrates rather than accumulating as oil. Oil accumulation byC. lipolytica from a corn oil substrate was slightly depressed by excess nitrogen in the medium. The yeasts were able to use about 18 g/l of oil in 72 hr. At substrate oil levels greater than 18 g/l, the dry yeasts were 60% oil, and about 45–57% of the substrate oil was recovered as yeast oil. The fatty acid composition of the yeast oil was quite similar to that of the substrate oil under optimum conditions of deposition. Sterols, but not tocopherols, were transferred from the substrate to the yeast oil.Candida lipolytica oil was high in free fatty acids. The greatest potential for biomodification by fermentation withC. lipolytica seems to be in altering glyceride structure.