Endothelial lipase (EL) is a major determinant of plasma HDL concentration, its activity being inversely proportional to HDL levels. Although it is known that it preferentially acts on HDL compared to LDL and VLDL, the basis for this specificity is not known. Here we tested the hypothesis that sphingomyelin, a major phospholipid in lipoproteins is a physiological inhibitor of EL, and that the preference of the enzyme for HDL may be due to low sphingomyelin/phosphatidylcholine (PtdCho) ratio in HDL, compared to other lipoproteins. Using recombinant human EL, we showed that sphingomyelin inhibits the hydrolysis of PtdCho in the liposomes in a concentration-dependent manner. While the enzyme showed lower hydrolysis of LDL PtdCho, compared to HDL PtdCho, this difference disappeared after the degradation of lipoprotein sphingomyelin by bacterial sphingomyelinase. Analysis of molecular species of PtdCho hydrolyzed by EL in the lipoproteins showed that the enzyme preferentially hydrolyzed PtdCho containing polyunsaturated fatty acids (PUFA) such as 22:6, 20:5, 20:4 at the sn-2 position, generating the corresponding PUFA-lyso PtdCho. This specificity for PUFA-PtdCho species was not observed after depletion of sphingomyelin by sphingomyelinase. These results show that sphingomyelin not only plays a role in regulating EL activity, but also influences its specificity towards PtdCho species.