Many of the highly pathogenic viruses including influenza virus, HIV and others of world wide epidemiological importance are enveloped and possess a membrane around the nucleocapsid containing the viral genome. Viral membrane is required to protect the viral genome and provide important functions for attachment, morphogenesis and transmission. Viral membrane is essentially composed of lipids and proteins. While the proteins on the viral envelope are almost exclusively virally encoded, lipids, on the other hand, are all of host origin and recruited from host membrane. However, lipids on the viral membrane are not incorporated randomly and do not represent average lipid composition of the host membrane. Recent studies support that specific lipid microdomains such as lipid rafts play critical roles in many aspects of the virus infectious cycle including attachment, entry, uncoating, protein transport and sorting as well as viral morphogenesis and budding. Lipid microdomains aid in bringing and concentrating viral components to the budding site. Similarly, specific viral protein plays an important role in organizing lipid microdomains in and around the assembly and budding site of the virus. This review deals with the specific role of lipid microdomains in different aspects of the virus life cycle and the role of specific viral proteins in organizing the lipid microdomains.