How Soap is Made: Soap is made by mixing animal or vegetable oils/ fats with lye that has been dissolved in water. Animal and vegetable fats are made up of fatty acids and glycerin. There are many kinds of fatty acids and one oil can contain several different kinds. The kind of fatty acids in the oil is what determines many of the qualities of the soap - such as how hard the bar is and what kind of lather it has. Whether the final soap is solid or liquid is determined by the type of lye used. Sodium hydroxide (also called caustic soda) makes a solid soap; potassium hydroxide (also called potash) makes a liquid soap. When lye solution is mixed with the oils, a chemical reaction occurs. The lye and fatty acids combine to make soap and glycerin is left over. The water helps to bring everything together. This process is called saponification.