Fatty acid esters of hydroxy fatty acids (FAHFAs) are a new group of endogenous lipids with anti-diabetic and anti-inflammatory effects found in recent years. In this review, the chemical structure of FAHFAs, the distribution of FAHFAs in various tissues, and the mechanisms underlying the anti-diabetic and anti-inflammatory effects of FAHFAs are introduced in detail. In addition, based on the biological functions such as the anti-inflammatory effect, FAHFAs may also play an essential role in the pathogenesis of autoimmune diseases.