The fatty acyl composition of phospholipids determines the biophysical character of membranes and impacts the function of membrane proteins. Here, we define a nuclear receptor pathway for the dynamic modulation of membrane composition in response to changes in cellular lipid metabolism. Ligand activation of liver X receptors (LXRs) preferentially drives the incorporation of polyunsaturated fatty acids into phospholipids through induction of the remodeling enzyme Lpcat3. Promotion of Lpcat3 activity ameliorates endoplasmic reticulum (ER) stress induced by saturated free fatty acids in vitro or by hepatic lipid accumulation in vivo. Conversely, Lpcat3 knockdown in liver exacerbates ER stress and inflammation. Mechanistically, Lpcat3 modulates inflammation both by regulating inflammatory kinase activation through changes in membrane composition and by affecting substrate availability for inflammatory mediator production. These results outline an endogenous mechanism for the preservation of membrane homeostasis during lipid stress and identify Lpcat3 as an important mediator of LXR effects on metabolism. Display omitted •Induction of Lpcat3 expression by LXRs promotes phospholipid remodeling•LXR-Lpcat3 activation drives unsaturated fatty acid incorporation into phospholipids•Lpcat3 activity in liver modulates lipid-induced ER stress and inflammation•Lpcat3 affects inflammation through regulation of membrane c-Src activity