Stress within the endoplasmic reticulum (ER) induces a coordinated response, namely the unfolded protein response (UPR), devoted to helping the ER cope with the accumulation of misfolded proteins. Failure of the UPR plays an important role in several human diseases. Recent studies report that intracellular accumulation of saturated fatty acids (SFAs) and cholesterol, seen in diseases of high incidence, such as obesity or atherosclerosis, results in ER stress. In the present study, we evaluated the effects of perturbations to lipid homeostasis on ER stress/UPR induction in the model eukaryote Saccharomyces cerevisiae. We show that SFA originating from either endogenous (preclusion of fatty acid desaturation) or exogenous (feeding with extracellular SFA) sources trigger ER stress and that ergosterol, the major sterol in yeast, acts synergistically with SFA in this process. This latter effect is connected to ergosterol accumulation within microsomal fractions from SFA-accumulating cells, which display highly saturated phospholipid content. Moreover, treating the cells with the molecular chaperone 4-phenyl butyrate abolishes UPR induction, suggesting that lipid-induced ER stress leads to an overload of misfolded protein that acts, in turn, as the molecular signal for induction of the UPR. The present data are discussed in the context of human diseases that involve lipid deregulation.