A novel pathway termed the sphingomyelin cycle has been identified whereby membrane sphingomyelin is hydrolyzed in response to multiple extracellular stimuli (such as tumor necrosis factor alpha) which cause activation of regulated sphingomyelinases. The product, ceramide, has emerged as a second messenger that mediates many of the cellular effects of these extracellular stimuli. An intriguing relation exists between activation of the sphingomyelin cycle and the action of multiple stress stimuli that induce growth arrest and programmed cell death. Exogenously administered ceramide mimics these growth-suppressing effects, including the induction of apoptosis. This review will highlight the role of the sphingomyelin cycle in signal transduction and will focus on the role and function of ceramide in the regulation of cell growth in general and apoptosis specifically.