IPP is an intermediate in the classical, HMG-CoA reductase pathway (commonly called the mevalonate pathway) and in the non-mevalonate MEP pathway of isoprenoid precursor biosynthesis.

Isoprenoid precursors such as IPP, and its isomer DMAPP, are used by organisms in the biosynthesis of terpenes and terpenoids.

IPP is formed from acetyl-CoA via the mevalonate pathway (the "upstream" part), and then is isomerized to dimethylallyl pyrophosphate by the enzyme isopentenyl pyrophosphate isomerase.

[2] IPP can be synthesised via an alternative non-mevalonate pathway of isoprenoid precursor biosynthesis, the MEP pathway, where it is formed from (E)-4-hydroxy-3-methyl-but-2-enyl pyrophosphate (HMB-PP) by the enzyme HMB-PP reductase (LytB, IspH).

The MEP pathway is present in many bacteria, apicomplexan protozoa such as malaria parasites, and in the plastids of higher plants.