The application of lipid-based drug delivery systems on the industrial scale has successfully demonstrated their therapeutic and manufacturing advantages. Recently, various lipid-based formulations were successfully prepared for oral delivery of compounds that are difficult to administer. Nevertheless, an improved understanding of how these formulations affect drug absorption and metabolism is required to support the rapid and successful completion of drug development programs. In this review, we report the detailed mechanisms whereby lipids and lipid-based excipients affect drug absorption and metabolism, and summarize the capacity of lipids and lipid-based formulations to improve drug absorption by improving drug solubility, mucosa penetration, lymphatic transport, and hepatic metabolism. Finally, we discuss the progress made toward the use of novel lipid formulations to enhance oral absorption by surmounting specific absorption barriers.