Acid sphingomyelinase (A-SMase, EC 3.1.4.12) catalyzes the lysosomal degradation of sphingomyelin to phosphorylcholine and ceramide. Inherited deficiencies of acid sphingomyelinase activity result in various clinical forms of Niemann-Pick disease, which are characterised by massive lysosomal accumulation of sphingomyelin. Sphingomyelin hydrolysis by both, acid sphingomyelinase and membrane-associated neutral sphingomyelinase, plays also an important role in cellular signaling systems regulating proliferation, apoptosis and differentiation. Here, we present a potent and selective novel inhibitor of A-SMase, L-alpha-phosphatidyl-D-myo-inositol-3,5-bisphosphate (PtdIns3,5P2), a naturally occurring substance detected in mammalian, plant and yeast cells. The inhibition constant Ki for the new A-SMase inhibitor PtdIns3,5P2 is 0.53 microM as determined in a micellar assay system with radiolabeled sphingomyelin as substrate and recombinant human A-SMase purified from insect cells. Even at concentrations of up to 50 microM, PtdIns3,5P2 neither decreased plasma membrane-associated, magnesium-dependent neutral sphingomyelinase activity, nor was it an inhibitor of the lysosomal hydrolases beta-hexosaminidase A and acid ceramidase. Other phosphoinositides tested had no or a much weaker effect on acid sphingomyelinase. Different inositol-bisphosphates were studied to elucidate structure-activity relationships for A-SMase inhibition. Our investigations provide an insight into the structural features required for selective, efficient inhibition of acid sphingomyelinase and may also be used as starting point for the development of new potent A-SMase inhibitors optimised for diverse applications.