Sphingolipid breakdown products are now being recognized as important players in apoptosis. Ceramide, which is considered to serve as second messenger, is mainly generated by hydrolysis of the membrane sphingophospholipid sphingomyelin (SM) through the action of a sphingomyelinase (SMase). However, little is known about the localization and regulation of this phenomenon. Here, we summarize the current knowledge on the function of SM hydrolysis in apoptosis signaling. In particular, the present review focuses on the role of neutral sphingomyelinase (N-SMase) in the generation of the proapoptotic ceramide. This enzyme is regulated by several mechanisms, including the tumor necrosis factor (TNF) receptor-associated protein FAN (for factor associated with N-SMase activation) and oxidative stress. These observations place SMase activation and SM hydrolysis as early events in the apoptosis signaling cascade.