Liposarcoma (LS) represents the most common type of soft tissue sarcoma. LS is subdivided into four distinct subtypes: well-differentiated, myxoid/round cell, pleomorphic, and mixed LS. In addition to distinctive morphology, each of the subgroups has a different prognosis and treatment strategy. While subgrouping has traditionally been based on conventional morphology, recent molecular and cytogenetic findings have validated the current classification system. Well-differentiated LS is characterized by overexpression of MDM2, which blocks the tumor suppressor function of p53. Myxoid/round cell LS is characterized by a specific translocation resulting in a fusion protein which interferes with adipocyte differentiation. Pleomorphic LS, like other high grade sarcomas, is characterized by multiple chromosomal abnormalities. Each of these distinctive molecular signatures can be exploited to aid in the subtyping of LS and in distinguishing true sarcomas of lipogenic derivation from benign mimics. Diagn. Cytopathol. 2012. © 2011 Wiley Periodicals, Inc.