Ketonic rancidity is associated with the lauric acid oils and butterfat. It arises when short and intermediate carbon chain length fatty acids (C6 to C14) are converted into methyl ketones (C5 to C13) by certain fungi. Ketonicrancidity will not occur in fats and oils that do not contain these fatty acids. Fermentation experiments with whole oils and simple triglycerides confirmed that only short and intermediate carbon chain length fatty acids were converted into methyl ketones. Methyl ketones produced contained one carbon atom less than the parent fatty acid. Tetradecanoic acid was the longest fatty acid to undergo conversion into its corresponding methyl ketone. Experiments with free fatty acids established that short and intermediate carbon chain length fatty acids inhibited the growth of Penicillium crustosum, Evidence was presented to demonstrate that the mitochondrion was a site of antifungal activity. It was concluded that the conversion of fatty acids into methyl ketones was a detoxification mechanism for their removal from the environment. Extrinsic factors (temperature, pH, aw, preservatives and O2 removal) were used to control fungal growth and ketonic rancidity. Fungal homeostatic mechanisms often enabled P.crustosum to grow under unfavourable environmental conditions. It was suggested that acombination of preservation measures should be used to prevent ketonic rancidity in the lauric acid oils and their products.