Fatty acid metabolism consists of various metabolic processes involving or closely related to fatty acids, a family of molecules classified within the lipid macronutrient category. These processes can mainly be divided into (1) catabolic processes that generate energy and (2) anabolic processes where they serve as building blocks for other compounds.

In catabolism, fatty acids are metabolized to produce energy, mainly in the form of adenosine triphosphate (ATP). When compared to other macronutrient classes (carbohydrates and protein), fatty acids yield the most ATP on an energy per gram basis, when they are completely oxidized to CO₂ and water by beta oxidation and the citric acid cycle. Fatty acids (mainly in the form of triglycerides) are therefore the foremost storage form of fuel in most animals, and to a lesser extent in plants.

In anabolism, intact fatty acids are important precursors to triglycerides, phospholipids, second messengers, hormones and ketone bodies. For example, phospholipids form the phospholipid bilayers out of which all the membranes of the cell are constructed from fatty acids. Phospholipids comprise the plasma membrane and other membranes that enclose all the organelles within the cells, such as the nucleus, the mitochondria, endoplasmic reticulum, and the Golgi apparatus. In another type of anabolism, fatty acids are modified to form other compounds such as second messengers and local hormones. The prostaglandins made from arachidonic acid stored in the cell membrane are probably the best-known of these local hormones.

Fatty acids are stored as triglycerides in the fat depots of adipose tissue. Between meals they are released as follows:

In the liver oxaloacetate can be wholly or partially diverted into the gluconeogenic pathway during fasting, starvation, a low carbohydrate diet, prolonged strenuous exercise, and in uncontrolled type 1 diabetes mellitus. Under these circumstances, oxaloacetate is hydrogenated to malate, which is then removed from the mitochondria of the liver cells to be converted into glucose in the cytoplasm of the liver cells, from where it is released into the blood. In the liver, therefore, oxaloacetate is unavailable for condensation with acetyl-CoA when significant gluconeogenesis has been stimulated by low (or absent) insulin and high glucagon concentrations in the blood. Under these conditions, acetyl-CoA is diverted to the formation of acetoacetate and beta-hydroxybutyrate. Acetoacetate, beta-hydroxybutyrate, and their spontaneous breakdown product, acetone, are frequently, but confusingly, known as ketone bodies (as they are not "bodies" at all, but water-soluble chemical substances). The ketones are released by the liver into the blood. All cells with mitochondria can take up ketones from the blood and reconvert them into acetyl-CoA, which can then be used as fuel in their citric acid cycles, as no other tissue can divert its oxaloacetate into the gluconeogenic pathway in the way that this can occur in the liver. Unlike free fatty acids, ketones can cross the blood–brain barrier and are therefore available as fuel for the cells of the central nervous system, acting as a substitute for glucose, on which these cells normally survive. The occurrence of high levels of ketones in the blood during starvation, a low carbohydrate diet, prolonged heavy exercise, or uncontrolled type 1 diabetes mellitus is known as ketosis, and, in its extreme form, in out-of-control type 1 diabetes mellitus, as ketoacidosis.

Fatty acids are broken down to acetyl-CoA by means of beta oxidation inside the mitochondria, whereas fatty acids are synthesized from acetyl-CoA outside the mitochondria, in the cytosol. The two pathways are distinct, not only in where they occur, but also in the reactions that occur, and the substrates that are used. The two pathways are mutually inhibitory, preventing the acetyl-CoA produced by beta-oxidation from entering the synthetic pathway via the acetyl-CoA carboxylase reaction. It can also not be converted to pyruvate as the pyruvate dehydrogenase complex reaction is irreversible. Instead the acetyl-CoA produced by the beta-oxidation of fatty acids condenses with oxaloacetate, to enter the citric acid cycle. During each turn of the cycle, two carbon atoms leave the cycle as CO₂ in the decarboxylation reactions catalyzed by isocitrate dehydrogenase and alpha-ketoglutarate dehydrogenase. Thus each turn of the citric acid cycle oxidizes an acetyl-CoA unit while regenerating the oxaloacetate molecule with which the acetyl-CoA had originally combined to form citric acid. The decarboxylation reactions occur before malate is formed in the cycle. Only plants possess the enzymes to convert acetyl-CoA into oxaloacetate from which malate can be formed to ultimately be converted to glucose.

However, acetyl-CoA can be converted to acetoacetate, which can decarboxylate to acetone (either spontaneously, or catalyzed by acetoacetate decarboxylase). It can then be further metabolized to isopropanol which is excreted in breath/urine, or by CYP2E1 into hydroxyacetone (acetol). Acetol can be converted to propylene glycol. This converts to pyruvate (by two alternative enzymes), or propionaldehyde, or to L-lactaldehyde then L-lactate (the common lactate isomer). Another pathway turns acetol to methylglyoxal, then to pyruvate, or to D-lactaldehyde (via S-D-lactoyl-glutathione or otherwise) then D-lactate. D-lactate metabolism (to glucose) is slow or impaired in humans, so most of the D-lactate is excreted in the urine; thus D-lactate derived from acetone can contribute significantly to the metabolic acidosis associated with ketosis or isopropanol intoxication. L-Lactate can complete the net conversion of fatty acids into glucose. The first experiment to show conversion of acetone to glucose was carried out in 1951. This, and further experiments used carbon isotopic labelling. Up to 11% of the glucose can be derived from acetone during starvation in humans.

The glycerol released into the blood during the lipolysis of triglycerides in adipose tissue can only be taken up by the liver. Here it is converted into glycerol 3-phosphate by the action of glycerol kinase which hydrolyzes one molecule of ATP per glycerol molecule which is phosphorylated. Glycerol 3-phosphate is then oxidized to dihydroxyacetone phosphate, which is, in turn, converted into glyceraldehyde 3-phosphate by the enzyme triose phosphate isomerase. From here the three carbon atoms of the original glycerol can be oxidized via glycolysis, or converted to glucose via gluconeogenesis.