Hair lipid composition varies by ethnic hair type and by hair layer. Lipids in the cuticle, cortex, and medulla of the hair shaft provide a protective barrier to environmental and chemical damage, prevent hair breakage and desorption, and affect the elastic and tensile properties of hair. The aim of this systematic review is to provide an overview of the lipid composition and ethnic differences of human hair, effects of external damage on lipid content and properties, and changes in hair lipid composition associated with disease states. PubMed/MEDLINE was searched up to March 2021 according to PRISMA guidelines for articles discussing the lipid content of human hair and effects of physical, chemical, or environmental damage, and disease. Fifty‐nine articles investigating the lipid content of hair were included for review. Lipids affect fluid permeability, hydration, strength, and texture of ethnic hair fibers. Lipid loss is accelerated by hair‐damaging treatments such as bleach, dye, perm, straightening, and surfactant use, and sun and aging processes, leading to dehydrated, breakable, disordered, and dull hair. Diseases including acne, alopecia, and breast, gastric, prostate, lung, and rectal cancers display elevated hair lipid levels. Lipids are vital in protection against damage and maintenance of healthy hair. Further studies are needed to investigate the effects of lipids on the structural properties of ethnic hair, and changes in hair lipid composition with various dermatologic and systemic diseases.