The oxidation of lipids has been shown to impact virtually all cellular processes. The paradigm has been that this involvement is due to interference with the functions of membrane‐associated proteins. It is only recently that methodological advances in molecular‐level detection and identification have begun to provide insights into oxidative lipid modification and its involvement in cell signaling as well as in major diseases and inflammation. Extensive evidence suggests a correlation between lipid peroxidation and degenerative neurological diseases such as Parkinson's and Alzheimer's, as well as type 2 diabetes and cancer. Despite the obvious relevance of understanding the molecular basis of the above ailments, the exact modes of action of oxidized lipids have remained elusive. In this minireview, we summarize recent findings on the biophysical characteristics of biomembranes following oxidative derivatization of their lipids, and how these altered properties are involved in both physiological processes and major pathological conditions. Lipid‐bearing, oxidatively truncated and functionalized acyl chains are known to modify membrane bulk physical properties, such as thermal phase behavior, bilayer thickness, hydration and polarity profiles, as manifest in the altered structural dynamics of lipid bilayers, leading to augmented membrane permeability, fast lipid transbilayer diffusion (flip‐flop), loss of lipid asymmetry (scrambling) and phase segregation (the formation of ‘rafts’). These changes, together with the generated reactive lipid derivatives, can be further expected to interfere with lipid–protein interactions, influencing metabolic pathways, causing inflammation, the execution phase in apoptosis and initiating pathological processes.