Understanding lipid-induced malfunction represents a major challenge of today's biomedical research. The connection of lipids to cellular and organ dysfunction, cell death, and disease (often referred to as lipotoxicity) is more complex than the sole lipotoxic effects of excess free fatty acids and requires genetically tractable model systems for mechanistic investigation. We herein summarize recent advances in the field of lipid-induced toxicity that employ the established model system for cell death and aging research of budding yeast Saccharomyces cerevisiae. Studies in yeast have shed light on various aspects of lipotoxicity, including free fatty acid toxicity, sphingolipid-modulated cell death as well as the involvement of cardiolipin and lipid peroxidation in the mitochondrial pathways of apoptosis. Regimens used range from exogenously applied lipids, genetic modulation of lipolysis and triacylglyceride synthesis, variations in sphingolipid/ceramide metabolism as well as changes in peroxisome function by either genetic or pharmacological means. In future, the yeast model of programmed cell death will further contribute to the clarification of crucial questions of lipid-associated malfunction.