ERM proteins are regulated by phosphorylation of the most C-terminal threonine residue, switching them from an activated to an inactivated form. However, little is known about the control of this regulation. Previous work in our group demonstrated that secretion of acid sphingomyelinase acts upstream of ERM dephosphorylation, suggesting the involvement of sphingomyelin (SM) hydrolysis in ERM regulation. To define the role of specific lipids, we employed recombinant bacterial sphingomyelinase (bSMase) as a direct probe of SM metabolism at the plasma membrane. bSMase induced a rapid dose-and timedependent decrease in ERM dephosphorylation. ERM dephosphorylation was driven by ceramide generation and not by sphingomyelin depletion, as shown using recombinant sphingomyelinase D. The generation of ceramide at the plasma membrane was sufficient for ERM regulation, and no intracellular SM hydrolysis was required, as was visualized using Venustagged lysenin probe, which specifically binds SM. Interestingly, hydrolysis of plasma membrane bSMase-induced ceramide using bacterial ceramidase caused ERM hyperphosphorylation and formation of cell surface protrusions. The effects of plasma membrane ceramide hydrolysis were due to sphingosine 1-phosphate formation, as ERM phosphorylation was blocked by an inhibitor of sphingosine kinase and induced by sphingosine 1-phosphate. Taken together, these results demonstrate a new regulatory mechanism of ERM phosphorylation by sphingolipids with opposing actions of ceramide and sphingosine 1-phosphate. The approach also defines a tool kit to probe sphingolipid signaling at the plasma membrane.Ezrin (82 kDa), radixin (80 kDa), and moesin (75 kDa), known as the ERM proteins, link the plasma membrane to the cortical cytoskeleton. These proteins have been found to be enriched in specialized plasma membrane domains such as microvilli, lamellipodia, membrane ruffles, and other membrane protrusions (1). ERM proteins have been implicated in regulation of cell shape (2), cell polarization (3, 4), membrane enzyme localization, membrane transport, cell adhesion/migration (5-7), and signal transduction (8). The function of ERM proteins is regulated by a two-step process based on an open (active) and closed (inactive) conformation. In the closed conformation, the N terminus domain (FERM) and the C terminus domain (C-ERMAD) interact with each other in a self-folded, dormant state, and the proteins rest in the cytosol. This folding is regulated by phosphorylation on the very C-terminal threonine residue (ezrin Thr 567 , radixin Thr 564 , and moesin Thr 558 ), which leads to the open, active conformation. In the active conformation, the FERM domain interacts with the plasma membrane, and with several membrane-associated proteins (CD95, CD44, intercellular adhesion molecule (I-CAM), CD43, cystic fibrosis transmembrane conductance regulator (CFTCR), and NHE1), and the C-ERMAD domain interacts with actin filaments in the submembrane cortex (9 -13). Several kinases have been shown to phosphorylate the C ter...