The association of lipids with biological mineral formation was first indicated by histochemical observations. This was later confirmed by biochemical studies which revealed that calcium was bound to acidic lipids at sites of early mineral deposition. The morphological locus of initial mineral formation has now been shown to be membrane-enclosed vesicles in the extracellular matrix. Recent studies on isolated vesicles have documented that they are rich in lipids very similar to those previously found to be associated with newly forming mineral. The vesicle lipids are enriched in cholesterol, free fatty acids, sphingomyelin, glycolipids, lysophospholipids, and phosphatidylserine, and depleted in phosphatidylcholine and -ethanolamine. This composition is like that of the plasma membrane of cells and supports electron microscopic evidence that the vesicles arise by budding from the chondrocyte surface membrane. Metabolic studies indicate that formation of the vesicles occurs relatively rapidly (i.e., in less than 6 hours) by biochemical processes involving both lipid synthesis and degradation. In vitro studies suggest that the vesicle lipids may be involved in the initial binding and phase separation of calcium phosphate, as well as its conversion to crystalline apatite; however, final elucidation of the mechanism of action remains to be attained.