Cyclopropane fatty acid synthase (CFAS) catalyzes the transfer of a methylene group from S-adenosyl methionine to an unsaturated fatty acid, generating a cyclopropane fatty acid (CFA). The gene encoding CFAS is present in many bacteria and several Leishmania spp. including Leishmania mexicana, Leishmania infantum and Leishmania braziliensis. In this study, we characterised the CFAS-null and -overexpression mutants in L. mexicana, the causative agent for cutaneous leishmaniasis in Mexico and central America. Our data indicate that L. mexicana CFAS modifies the fatty acid chain of plasmenylethanolamine (PME), the dominant class of ethanolamine glycerophospholipids in Leishmania, generating CFA-PME. While the endogenous level of CFA-PME is extremely low in wild type L. mexicana, overexpression of CFAS results in a significant increase. CFAS-null mutants (cfas) exhibit altered cell shape, increased sensitivity to acidic pH, and aberrant growth in serum-free media. In addition, the CFAS protein is preferentially expressed during the proliferative stage of L. mexicana and is required for the cell membrane targeting of lipophosphoglycan. Finally, the maturation and localization of CFAS protein are dependent upon the downstream sequence of the CFAS coding region. Without the downstream sequence, the mis-localised CFAS protein cannot fully rescue the defects of cfas. Our data suggest that CFA modification of phospholipids can significantly affect the parasite's response to certain adverse conditions. These findings are distinct from the roles of CFAS in L. infantum, highlighting the functional divergence in lipid modification among Leishmania spp.