Ceramides are important intermediates in sphingolipid biosynthesis (and degradation) and are normally present in only small amounts in unstressed cells. However, following the receptor-mediated activation of neutral sphingomyelinase, sphingomyelin can acutely give rise to substantial amounts of ceramides, which dramatically alter membrane properties. In this study, we have examined the role of the 1-OH and 3-OH functional groups of ceramide for its membrane properties. We have specifically examined how the oxidation of the primary alcohol to COOH or COOMe in palmitoyl ceramide (PCer) or the removal of either the primary alcohol or C(3)-OH (deoxy analogs) affected ceramides' interlipid interactions in fluid phosphatidylcholine bilayers. Measuring the time-resolved fluorescence emission of trans-parinaric acid, or its steady-state anisotropy, we have obtained information about the propensity of the ceramide analogs to form ceramide-rich domains and the thermostability of the formed domains. We observed that the oxidation of the primary alcohol to COOH shifted the ceramide's gel-phase onset concentration to slightly higher values in 1-palmitoyl-2-oleoyl- sn-3- glycero-3-phosphocholine (POPC) bilayers. Methylation of the COOH function of the ceramide did not change the segregation tendency further. The complete removal of the primary alcohol dramatically reduced the ability of 1-deoxy-PCer to form ceramide-rich ordered domains. However, the removal 3-OH (in 3-deoxy-PCer) had only small effects on the lateral segregation of the ceramide analog. The thermostability of the ceramide-rich domains in the POPC bilayers decreased in the following order: 1-OH > COOH > COOMe = 3-deoxy > 1-deoxy. We conclude that ceramide needs a hydrogen-bonding-competent functional group in the C(1) position to be able to form laterally segregated ceramide-rich domains of high packing density in POPC bilayers. The presence or absence of 3-OH was not functionally critical for ceramide's lateral segregation properties.