Sphingomyelin or the products derived from its metabolism may constitute a signaling system involved in a variety of cellular processes. The activation of a plasma membrane neutral sphingomyelinase, which catalyzes the first step in sphingomyelin turnover, has been suggested to play an important role in cellular differentiation. We have studied the effect of exogenous staphylococcal sphingomyelinase on DNA synthesis and on the composition of membrane sphingolipids in quiescent Swiss 3T3 fibroblasts. Sphingomyelinase stimulated proliferation of Swiss 3T3 cells and potentiated the mitogenic action of other growth factors, such as insulin, epidermal growth factor, and bombesin. Treatment with sphingomyelinase produced a significant decrease in sphingomyelin accompanied by a corresponding increase in ceramide levels. No significant increases were detected in the levels of products derived from ceramide, i.e. ceramide 1-phosphate, sphingosine, or sphingosine 1-phosphate. To further investigate the role of ceramide in cellular proliferation, we studied the effect of cell-permeable analogs of ceramide on DNA synthesis in quiescent Swiss 3T3 cells. Both N-hexanoylsphingosine and N-acetylsphingosine at low concentrations stimulated [3H]thymidine incorporation and acted synergistically with a wide variety of growth factors known to induce proliferation of quiescent Swiss 3T3 fibroblasts. Similar effects were observed with bovine brain ceramides. These results suggest that ceramide may be involved in the regulation of cellular proliferation.