Phenolic lipids, consisting of a polar aromatic ring and a hydrophobic alkyl chain, are widely distributed in bacteria, fungi, and plants and appear to play important roles in biological membranes. Recent studies showed that many type III polyketide synthases (PKSs) are responsible for the biosynthesis of phenolic lipids such as alkylresorcinol and alkylpyrone. Type III PKSs are homodimeric ketosynthases that use a single active site for both the condensation and cyclization reactions. Phenolic lipid-producing Type III PKSs accept a long-chain acyl unit as a starter unit and catalyze iterative condensation reactions with extender units, such as malonyl-CoA, to construct the aromatic ring moiety of phenolic lipids. Type III PKSs can synthesize structurally diverse phenolic lipids due to variations in their preferences for starter and extender substrates, the number of condensation steps, and the mechanisms of cyclization reactions. Subsequent modifications by post-PKS tailoring enzymes such as methyltransferase and hydroxylase further diversify the chemical structures of these phenolic lipids. This review summarizes the biosynthetic pathways for microbial and plant phenolic lipids.