The present study determined whether activation of acid sphingomyelinase (ASM) drives membrane proximal lysosomes to fuse to the cell surface, facilitating membrane lipid rafts (LRs) clustering in coronary arterial endothelial cells (CAECs) and leading to endothelial dysfunction. By confocal microscopy, the activators of ASM, phosphatidylinositol (PI), and bis (monoacylglyceryl) phosphate (Bis), and an inducer of ASM, butyrate, were found to increase LRs clustering in bovine CAECs, which was blocked by lysosome fusion inhibitor vacuolin-1. However, arsenic trioxide (Ars), an inducer of de novo synthesis of ceramide, had no such effect. Similarly, vacuolin-1-blockable effects were observed using fluorescence resonance energy transfer detection. Liquid chromatography-electrospray ionization-tandem mass spectrometry analysis demonstrated that all of these treatments, even Ars, increased ceramide production in CAECs. When ASM gene was silenced, all treatments except Ars no longer increased ceramide levels. Furthermore, dynamic fluorescence monitoring in live cells showed that PI and Bis stimulated lysosome-membrane fusion in CAECs. Functionally, PI and Bis impaired endothelium-dependent vasodilation in perfused coronary arteries, which was blocked by vacuolin-1 and a lysosome function inhibitor, bafilomycine. FasL (Fas ligand), a previously confirmed lysosome fusion stimulator as a comparison, also produced a similar effect. It is concluded that ASM activation serves as a triggering mechanism and driving force, leading to fusion of membrane proximal lysosomes into LR clusters on the cell membrane of CAECs, which represents a novel mechanism mediating endothelial dysfunction during death receptor activation or other pathological situation.