Human breast milk is the optimal source of nutrition for infant growth and development. Breast milk fats and their downstream derivatives of fatty acids and fatty acid-derived terminal mediators not only provide an energy source but also are important regulators of development, immune function, and metabolism. The composition of the lipids and fatty acids determines the nutritional and physicochemical properties of human milk fat. Essential fatty acids, including long-chain polyunsaturated fatty acids (LCPUFAs) and specialized pro-resolving mediators, are critical for growth, organogenesis, and regulation of inflammation. Combined data including in vitro, in vivo, and human cohort studies support the beneficial effects of human breast milk in intestinal development and in reducing the risk of intestinal injury. Human milk has been shown to reduce the occurrence of necrotizing enterocolitis (NEC), a common gastrointestinal disease in preterm infants. Preterm infants fed human breast milk are less likely to develop NEC compared to preterm infants receiving infant formula. Intestinal development and its physiological functions are highly adaptive to changes in nutritional status influencing the susceptibility towards intestinal injury in response to pathological challenges. In this review, we focus on lipids and fatty acids present in breast milk and their impact on neonatal gut development and the risk of disease.