High levels of triglycerides (TG) and free fatty acids (FFA) in maternal plasma, in diabetes, promote fat passage to the fetus. In the streptozotocin-diabetic rat a significant correlation exists between maternal plasma and fetal tissue lipid contents, as shown by the accretion of labeled fatty acids or linoleate used as markers of maternal fat transfer. The passage of lipids through the placenta is not direct--this organ serves as an interim storage barrier with its lipid content increasing in proportion to the maternal TG and FFA level. Very low density lipoprotein (VLDL) TG are taken up with the aid of lipoprotein lipase as evident from TG = glycerol exchange when doubly labeled VLDL-TG are presented to the placenta. Esterification rate of albumin-bound FFA is considerably higher indicating that the rate of TG lipolysis is rate limiting and that the FFA are the main precursor of the placental lipids. The uptake of both FFA and VLDL-TG is associated with the retention of a substantial amount of FFA in the placenta. The size of the FFA pool corresponds to the size of the extracellular fluid space. The FFA cannot be eluted by repeated washing, suggesting that they are membrane bound. Placental slices with prelabeled TG gradually release FFA into the medium upon reincubation with FFA-free albumin, indicating that TG and FFA traverse the placenta in part by a sequential process of esterification and lipolysis and in part by diffusion as FFA. The latter are probably moving from the maternal to the fetal side within the interfacial capillary membrane lipids.