Amyloid plaques in brains are one of the major pathological hallmarks of Alzheimer's disease (AD). These plaques are mainly formed by aggregated Aβ, generated by proteolytic cleavage of the amyloid precursor protein (APP). Therefore, APP processing and Aβ production have been one of the central scopes in AD research in the past. Now, accumulating evidence suggests that besides its pathological impact, APP and its cleavage products also contribute to physiological functions. Proteolytic cleavage of APP is tightly regulated, and several lipids such as cholesterol and sphingolipids have been shown to influence APP processing and Aβ generation. In turn, Aβ as well as other APP cleavage products plays an essential role in regulating lipid homeostasis arguing for complex regulatory cycles in which lipids control APP processing and vice versa. This balanced regulation is disrupted under pathological conditions such as in AD. This article will review the physiological function of APP and its proteolytic products, especially Aβ and AICD, in regulating lipid homeostasis and which lipid species modulate APP processing. Furthermore, we summarize the alterations in lipid metabolism observed in AD patients and AD mouse models.