On the canalicular membranes of hepatocytes, several ABC transporters are responsible for the secretion of bile lipids. Among them, ABCB4, also called MDR3, is essential for the secretion of phospholipids from hepatocytes into bile. The biliary phospholipids are associated with bile salts and cholesterol in mixed micelles, thereby reducing the detergent activity and cytotoxicity of bile salts and preventing cholesterol crystallization. Mutations in the ABCB4 gene result in progressive familial intrahepatic cholestasis type 3, intrahepatic cholestasis of pregnancy, low-phospholipid-associated cholelithiasis, primary biliary cirrhosis, and cholangiocarcinoma. In vivo and cell culture studies have demonstrated that the secretion of biliary phospholipids depends on both ABCB4 expression and bile salts. In the presence of bile salts, ABCB4 located in nonraft membranes mediates the efflux of phospholipids, preferentially phosphatidylcholine. Despite high homology with ABCB1, ABCB4 expression cannot confer multidrug resistance. This review summarizes our current understanding of ABCB4 functions and physiological relevance, and discusses the molecular mechanism for the ABCB4-mediated efflux of phospholipids.