To address the role of cell membrane neutral sphingomyelinase (EC 3.1.4.12; SMase) in the regulation of cholesterol metabolism in the liver parenchymal cell, we examined the effect of exogenous neutral SMase on the metabolism of cholesteryl esters and the secretion of VLDL and biliary lipids in isolated rat hepatocytes. We show that treatment of hepatocytes with SMase (20 mU/mL) resulted in the intracellular buildup of cholesteryl esters, increased ACAT (EC 2.3.1.26) activity without affecting the ACAT2 mRNA level, and increased cytosolic and microsomal cholesteryl ester hydrolase (EC 3.1.1.13) activity. This was accompanied by increases in the secretion of biliary bile acid, phospholipid, and cholesterol and in increased cholesterol 7alpha-hydroxylase (EC 1.14.13.17) activity and levels of mRNA, as well as decreased levels of apoB mRNA and a decreased secretion of VLDL apoB (apoB-48, approximately 45%; apoB-100, approximately 32%) and lipids (approximately 55%). Moreover, the VLDL particles secreted had an abnormal size and lipid composition; they were larger than controls, were relatively enriched in cholesteryl ester, and depleted in TG and cholesterol. Cell-permeable ceramides did not replicate any of the reported effects. These findings demonstrate that the increased cholesteryl ester turnover, oversecretion of biliary cholesterol and bile acids, and undersecretion of VLDL cholesterol and particles are concerted responses of the primary hepatocytes to exogenous neutral SMase brought about by regulation at several levels. We suggest that plasma membrane neutral SMase may have a specific, ceramide-independent effect in the regulation of cholesterol output pathways in hepatocytes.