The hypothesis of the present study was that cod larvae have a limitation in lipid digestion, and that absorption of lipids would increase by pre-hydrolysation. The diets used were designed to contain 15 % lipid, of which 40 % was phosphatidylcholine (PC) and 60 % was TAG. Cod larvae (40 d post hatch (dph)) were fed a single meal where either PC or TAG was radioactively labelled, and the labelled PC or TAG was either intact or hydrolysed (pre-digested). The larvae were then incubated individually in chambers with collection of CO2 for 10 h. The following fractions were analysed for radioactivity: the incubation water (evacuated feed); the intestine; the body; the CO2 trap. The larvae ate a 16–29 μg diet, equivalent to 3·4–5·2 % of dry body weight. In the whole population, 0–16 % of the lipid was evacuated. The larvae that had eaten less than 1·9–2·7 μg lipid absorbed close to 100 % of the lipid, absorption being defined conservatively as the amount contained in the carcass and CO2, excluding the intestinal tissue. In these larvae, approximately 100 % of the absorbed lipid was also catabolised. In the larvae that ingested more than 1·9–2·7 μg lipid, there was a linear reduction in lipid absorption to a minimum of 55 % at the highest lipid intakes parallel to an increasing retention of lipids in the carcass. There were only minor differences in digestion, absorption, retention and metabolism of lipids between the larvae fed the different diets, and the larvae tended to retain lipid classes as they were present in the feed. The study shows that 40-dph Atlantic cod larvae have an efficient utilisation of dietary lipids supplied as intact PC and TAG.