Phosphatidylethanol is a unique phospholipid which is formed in cell membranes only in the presence of ethanol. The reaction is catalysed by phospholipase D, an enzyme that normally catalyses the hydrolysis of phospholipids leading to the formation of phosphatidic acid. However, phospholipase D also utilizes short-chain alcohols as substrates resulting in the formation of the corresponding phosphatidylalcohol. This is a specific mechanism through which ethanol may interact with cell function. Phospholipase D is activated by several different receptors and has during recent years been suggested to play a role in cellular signalling. Secretory processes as well as long-term changes of cell function have been associated with the activation of phospholipase D. Since ethanol competes with water as a substrate for this enzyme, phosphatidylethanol is formed at the expense of the normal lipid product, phosphatidic acid, in an ethanol concentration-dependent manner. Therefore, the phospholipase D-mediated signal transduction diverges from production of the normal signalling lipid in the presence of ethanol. However, phosphatidic acid may also be formed by other pathways and their relative contribution to the formation of this lipid depends on the cell and receptor type. Thus, it is important to identify the signalling systems where phospholipase D dominates the lipid messenger production since these may be especially vulnerable to ethanol. In addition to a change in phospholipase D-mediated signal transduction, accumulation of phosphatidylethanol in cell membranes may also induce disturbances in cell function. Significant amounts of this abnormal phospholipid have been detected after ethanol exposure in brain and other organs from rat, in cultured cells as well as in human blood cells. The degradation of phosphatidylethanol is relatively slow and it remains in the cells after ethanol has disappeared. It is possible that an abnormal phospholipid that accumulates in cell membranes affects membrane-associated processes. Phosphatidylethanol is a lipid with a small, anionic head group and its biophysical properties are different compared with other phospholipids. Moreover, this lipid has been demonstrated to influence membrane characteristics, enzyme activities and levels of signalling molecules. Thus, both the inhibition of phospholipase D-mediated signal transduction and the accumulation of phosphatidylethanol represent possible pathways through which ethanol may disturb cell function.