The mechanism of tumor necrosis factor (TNF)-α signaling is unknown. TNF-α signaling may involve sphingomyelin hydrolysis to ceramide by a sphingomyelinase and stimulation of a ceramide-activated protein kinase. In a cell-free system, TNF-α induced a rapid reduction in membrane sphingomyelin content and a quantitative elevation in ceramide concentrations. Ceramide-activated protein kinase activity also increased. Kinase activation was mimicked by addition of sphingomyelinase but not by phospholipases A₂, C, or D. Reconstitution of this cascade in a cell-free system demonstrates tight coupling to the receptor, suggesting this is a signal transduction pathway for TNF-α.