The effect of bile and pancreatic juice on the pattern of lipids in the intestinal digesta of the sheep has been examined using animals suitably prepared with chronic intestinal fistulæ. The major lipid of digesta collected anterior to the common bile duct was the free fatty acid fraction composed mainly of palmitic and stearic acids. Digesta collected immediately posterior to the common bile duct contained, in addition, polyunsaturated fatty acids and lecithin, indicating that these lipids originated in the mixed secretions of bile and pancreatic juice. In the mid jejunum the major phospholipid was lysolecithin derived from the hydrolysis of lecithin by pancreatic enzymes. In the duodenum and jejunum the free fatty acids were associated mainly with the particulate matter of digesta, but in the ileum the free fatty acids were more evenly distributed between the particulate and aqueous phases. Negligible amounts of monoglyceride were present in digesta of the small intestine. Diversion of bile and pancreatic juice from the intestine resulted in the disappearance of lysolecithin and a decrease in the content of unsaturated fatty acids in the digesta of the jejunum. The digestion of lipids in the sheep intestine is discussed in relation to the possible role of bile and pancreatic juice. It is suggested that a major function of pancreatic juice is to provide, by interaction with biliary lecithin, the lysolecithin required for optimum micelle formation and lipid absorption. © 1969 The Physiological Society