Palmitate modifies both peripheral and integral membrane proteins and its addition can be permanent or transient, which makes it unique among the lipid modifications of proteins. The presence of palmitate on a protein affects how the protein interacts with lipids and proteins in a membrane compartment, and the reversibility of palmitoylation allows different modes of trafficking between membrane compartments. Here, we review recent studies that have provided insights into the mechanisms that mediate the functional consequences of this versatile modification.