Much is now understood concerning the synthesis of prenylated and palmitoylated proteins, but what is known of their metabolic fate? This review details metabolic pathways for the lysosomal degradation of S-fatty acylated and prenylated proteins. Central to these pathways are two lysosomal enzymes, palmitoyl-protein thioesterase (PPT1) and prenylcysteine lyase (PCL). PPT1 is a soluble lipase that cleaves fatty acids from cysteine residues in proteins during lysosomal protein degradation. Notably, deficiency in the enzyme causes a neurodegenerative lysosomal storage disorder, infantile neuronal ceroid lipofuscinosis. PCL is a membrane-associated flavin-containing lysosomal monooxygenase that metabolizes prenylcysteine to prenyl aldehyde through a completely novel mechanism.The eventual metabolic fates of other lipidated proteins (such as glycosylphosphatidylinositol-anchored and N-myristoylated proteins) are poorly understood, suggesting directions for future research.