Its primary function is preventing the absorption of fats from the human diet by acting as a lipase inhibitor, thereby reducing caloric intake.

[4] Orlistat is the saturated derivative of lipstatin, a potent natural inhibitor of pancreatic lipases isolated from the bacterium Streptomyces toxytricini.

Pooled data from clinical trials suggest that people given orlistat in addition to lifestyle modifications, such as diet and exercise, lose about 2–3 kilograms (4–7 lb) more than those not taking the drug over the course of a year.

[11] Orlistat also modestly reduces blood pressure and appears to prevent the onset of type 2 diabetes, whether from the weight loss itself or other effects.

[13] Over-the-counter approval was controversial in the United States, with consumer advocacy group Public Citizen repeatedly opposing it on safety and efficacy grounds.

[16] Orlistat is contraindicated in:[4] The primary side effects of the drug are gastrointestinal-related, and include steatorrhea (oily, loose stools with excessive flatus due to unabsorbed fats reaching the large intestine), fecal incontinence and frequent or urgent bowel movements.

[17] To minimize these effects, foods with high fat content should be avoided; the manufacturer advises consumers to follow a low-fat, reduced-calorie diet.

[20] On 26 May 2010, the U.S. Food and Drug Administration (FDA) approved a revised label for Xenical to include new safety information about cases of severe liver injury that have been reported rarely with the use of this medication.

[29] The Medicines and Healthcare products Regulatory Agency (MHRA) has suggested the possibility that orlistat could reduce the absorption of antiretroviral HIV medications.

[32][33] When lipase activity is blocked, triglycerides from the diet are not hydrolyzed into absorbable free fatty acids, and instead are excreted unchanged.

Only trace amounts of orlistat are absorbed systemically; the primary effect is local lipase inhibition within the GI tract after an oral dose.

One profiling study undertook a chemical proteomics approach to look for new cellular targets of orlistat, including its off-targets.

[40] On 23 January 2006, an FDA advisory panel voted 11 to 3 to recommend the approval of an OTC formulation of orlistat, to be sold under the brand name Alli by GlaxoSmithKline.

Formulations with 120 mg per tablet require a prescription, but can be sold without one in pharmacies under an exemption rule, which is based on a list of easily diagnosable diseases.