Experiments were carried out to characterize the transformation of lipids in activated sludge under aerobic conditions. Results showed that the overall lipid content in the effluent could not be reduced to values below 300 mg/L from an initial content of 2, 000 mg/L. However, the contents of individual fatty acids underwent drastic decreases and increases during all microbial growth phases. These changes in contents of individual fatty acids showed that fatty acids were used as substrates by microorganisms as well as released into the wastewater as by-products. We have therefore suggested a novel model of transformation of lipids in activated sludge, showing that utilization of microbial activity for complete removal of lipids from wastewater is limited.