Alterations in the trafficking and function of the endocytic pathway have been extensively documented to be one of the earliest pathological changes in sporadic Alzheimer's disease (AD). Although the pathophysiological consequences of these endosomal/lysosomal changes are currently unknown, several recent studies have suggested that such changes in endocytic function are able to cause a redistribution of several lysosomal hydrolases into early endosomes, leading to the overproduction of neurotoxic amyloid peptide. Recently, we and others have demonstrated that abnormal endocytic pathology within post-mitotic neurons can, in part, be attributed to alterations in sphingomyelin/ceramide metabolism, resulting in the intracellular accumulation of ceramide. Once inside the cell, the ability of ceramide to physically alter membrane structure, formation, and fusion, rather than serving solely as a lipid secondary messenger, may severely compromise normal endocytic trafficking. In this review, we will discuss the potential pathological effects of abnormal sphingomyelin/ceramide metabolism on intracellular vesicular transport in relation to both amyloid accumulation in AD and various neurodegenerative diseases associated with lysosomal abnormalities.