BACKGROUND: Yarrowia lipolytica is a common biotechnological chassis for the production of lipids, which are the preferred feedstock for the production of fuels and chemicals. To reduce the cost of microbial lipid production, inexpensive carbon sources must be used, such as lignocellulosic hydrolysates. Unfortunately, lignocellulosic materials often contain toxic compounds and a large amount of xylose, which cannot be used by Y. lipolytica. RESULTS: In this work, we engineered this yeast to efficiently use xylose as a carbon source for the production of lipids by overexpressing native genes. We further increased the lipid content by overexpressing heterologous genes to facilitate the conversion of xylose-derived metabolites into lipid precursors. Finally, we showed that these engineered strains were able to grow and produce lipids in a very high yield (lipid content = 67%, titer = 16.5 g/L, yield = 3.44 g/g sugars, productivity 1.85 g/L/h) on a xylose-rich agave bagasse hydrolysate in spite of toxic compounds. CONCLUSIONS: This work demonstrates the potential of metabolic engineering to reduce the costs of lipid production from inexpensive substrates as source of fuels and chemicals.