Palmitoylation - the post-translational modification of proteins with the lipid palmitate - has emerged as an important mechanism for regulating protein trafficking and function. Classic studies showed that palmitoylation targets many signalling enzymes to specialized lipid microdomains on the cytosolic face of the plasma membrane, thereby directing their integration into specific transduction pathways. More recent work shows that palmitate reversibly modifies numerous classes of neuronal proteins, including neurotransmitter receptors, synaptic scaffolding proteins and secreted signalling molecules. This review highlights recent evidence that protein palmitoylation regulates trafficking and signalling pathways that are important for brain development and synaptic transmission.