This chapter discusses fatty acids, the building blocks of lipids, which represent a significant fraction of the total lipid pool in aquatic organisms. It explores how chain length and levels of unsaturation (number of double bonds) have been shown to be correlated to decomposition, indicating a pre- and postdepositional selective loss of short-chain and polyunsaturated fatty acids. In contrast, saturated fatty acids are more stable and typically increase in relative proportion to total fatty acids with increasing sediment depth. Polyunsaturated fatty acids (PUFAs) are predominantly used as proxies for the presence of “fresh” algal sources, although some PUFAs also occur in vascular plants and deep-sea bacteria. Thus, these biomarkers represent a very diverse group of compounds present in aquatic systems. The numerous applications of fatty acid biomarkers to identifying the sources of organic matter in lakes, rivers, estuaries, and marine ecosystems are discussed.