Storage triacylglycerols (TAG) and membrane phospholipids share common precursors, i.e. phosphatidic acid and diacylglycerol, in the endoplasmic reticulum. In addition to providing a biophysically rather inert storage pool for fatty acids, TAG synthesis plays an important role to buffer excess fatty acids (FA). The inability to incorporate exogenous oleic acid into TAG in a yeast mutant lacking the acyltransferases Lro1p, Dga1p, Are1p, and Are2p contributing to TAG synthesis results in dysregulation of lipid synthesis, massive proliferation of intracellular membranes, and ultimately cell death. Carboxypeptidase Y trafficking from the endoplasmic reticulum to the vacuole is severely impaired, but the unfolded protein response is only moderately up-regulated, and dispensable for membrane proliferation, upon exposure to oleic acid. FA-induced toxicity is specific to oleic acid and much less pronounced with palmitoleic acid and is not detectable with the saturated fatty acids, palmitic and stearic acid. Palmitic acid supplementation partially suppresses oleic acid-induced lipotoxicity and restores carboxypeptidase Y trafficking to the vacuole. These data show the following: (i) FA uptake is not regulated by the cellular lipid requirements; (ii) TAG synthesis functions as a crucial intracellular buffer for detoxifying excess unsaturated fatty acids; (iii) membrane lipid synthesis and proliferation are responsive to and controlled by a balanced fatty acid composition.