The plasma membrane is not a uniform phospholipid bilayer; it has specialized membrane nano- or microdomains called lipid rafts. Lipid rafts are small cholesterol and sphingolipid-rich plasma membrane islands. Although their existence was long debated, their presence in the plasma membrane of living cells is now well accepted with the advent of super-resolution imaging techniques. It is interesting to note that lipid rafts function to compartmentalize receptors and their regulators and substantially modulate cellular signaling. In this review, we will examine the role of lipid rafts and caveolae-lipid raft-like microdomains with a distinct 3D morphology-in cellular signaling. Moreover, we will investigate how raft compartmentalized signaling regulates diverse physiological processes such as proliferation, apoptosis, immune signaling, and development. Also, the deregulation of lipid raft-mediated signaling during tumorigenesis and metastasis will be explored.