The importance of milk fat as a bulk food ingredient means that significant commercial interest exists in maximising its economic value through enhancement of its functional and quality attributes. Re-appraisal of the health benefits of milk fat, in recent years, along with increased appreciation of its unique organoleptic and textural properties, has also contributed to enhanced consumer appreciation. This chapter provides an overview of the physical and chemical mechanisms available for the modification and fractionation of milk fat and its components. Physical modification of milk fat is discussed under the headings of crystallisation, fractionation technologies and processing factors, chemical composition of milk fat fractions, applications of fractionated products, effects of minor lipid components and removal of cholesterol. Chemical and enzymatic modification of milk fat is also discussed, as processing options for development of milk fat products with desirable functional and nutritional properties. Recent technological developments in milk fat processing are described, which can lead to improved production efficiency, impact positively on carbon footprint and enhance the functional properties of milk fat-containing products. The chapter provides a comprehensive review of commercial developments and research activity in milk fat modification, processing and value addition.