Lipids are a crucial component in parenteral nutrition but their prolonged use can be associated with parenteral nutrition-associated liver disease (PNALD), which may lead to significant morbidity and mortality. The purpose of this review is to discuss the current state of lipid management in pediatric intestinal failure, especially as it relates to the prevention of PNALD. Lipid restriction has emerged as a successful strategy in both the treatment and prevention of PNALD in parenteral nutrition-dependent children. There is concern, however, that lipid restriction can lead to essential fatty acid deficiency. This, in turn, may affect neurodevelopmental outcomes. A wide variety of lipid emulsion formulations is available throughout the world although only one, a soybean-based product, is Food and Drug Administration-approved for use in the pediatric population. To date, there are no definitive data favoring one lipid emulsion composition over another. Pediatric intestinal failure patients are at high risk for the development of PNALD. Although this may be managed, and even prevented, with lipid restrictive strategies, the development of essential fatty acid deficiency in this setting remains a concern. Further studies are needed to determine the ideal lipid emulsion and dose to be used in parenteral nutrition-dependent children.