The human acid sphingomyelinase (ASM, EC 3.1.4.12), a lysosomal and secretory protein coded by the sphingomyelin phosphodiesterase 1 (SMPD-1) gene, catalyzes the degradation of sphingomyelin (SM) to ceramide and phosphorylcholine. We examined the structural-functional properties of its carboxyl-terminus (amino acids 462-629), which harbors approximately 1/3 of all mutations discovered in the SMPD-1 gene. We created four naturally occurring mutants (DeltaR608, R496L, G577A, and Y537H) and five serial carboxyl-terminal deletion mutants (N620, N590, N570, N510, and N490). Transient transfection of the His/V5-tagged wild-type and mutant recombinant ASM in Chinese hamster ovary cells showed that all the mutants were normally expressed. Nonetheless, none of them, except the smallest deletion mutant N620 that preserved all post-translational modifications, were found capable of secretion to the medium. Furthermore, only the N620 conserved functional integrity (100% activity of the wild type); all other mutants completely lost the ability to catalyze SM hydrolysis. Importantly, cell surface biotinylation revealed that mutant DeltaR608 transfected CHO cells and fibroblasts from a compound heterozygous Niemann-Pick disease type B (NPD-B) patient (DeltaR608 and R441X) have defective translocation to the plasma membrane. Furthermore, we demonstrated that the DeltaR608 and N590 were trapped in the endoplasmic reticulum (ER) quality control checkpoint in contrast to the wild-type lysosomal localization. Interestingly, while the steady-state levels of ubiquitination were minimal for the wild-type ASM, a significant amount of Lys63-linked polyubiquitinated DeltaR608 and N590 could be purified by S5a-affinity chromatography, indicating an important misfolding in the carboxyl-terminal mutants. Altogether, we provide evidence that the carboxyl-terminus of the ASM is crucial for its protein structure, which in turns dictates the enzymatic function and secretion.