Bacterial lipoproteins are synthesized as precursors in the cytoplasm and processed into mature forms on the cytoplasmic membrane. A lipid moiety attached to the N terminus anchors these proteins to the membrane surface. Many bacteria are predicted to express more than 100 lipoproteins, which play diverse functions on the cell surface. The Lol system, composed of five proteins, catalyzes the localization of Escherichia coli lipoproteins to the outer membrane. Some lipoproteins play vital roles in the sorting of other lipoproteins, lipopolysaccharides, and β-barrel proteins to the outer membrane. On the basis of results from biochemical, genetic, and structural studies, we discuss the biogenesis of lipoproteins in bacteria, their importance in cellular functions, and the molecular mechanisms underlying efficient sorting of hydrophobic lipoproteins to the outer membrane through the hydrophilic periplasm.