The role of the sphingolipid ceramide in modulating the immune response has been controversial, in part because of conflicting data regarding its ability to regulate the transcription factor NF-kappaB. To help clarify this role, we investigated the effects of ceramide on IL-2, a central NF-kappaB target. We found that ceramide inhibited protein kinase C (PKC)-mediated activation of NF-kappaB. Ceramide was found to significantly reduce the kinase activity of PKCtheta as well as PKCalpha, the critical PKC isozymes involved in TCR-induced NF-kappaB activation. This was followed by strong inhibition of IL-2 production in both Jurkat T leukemia and primary T cells. Exogenous sphingomyelinase, which generates ceramide at the cell membrane, also inhibited IL-2 production. As expected, the repression of NF-kappaB activation by ceramide led to the reduction of transcription of the IL-2 gene in a dose-dependent manner. Inhibition of IL-2 production by ceramide was partially overcome when NF-kappaB nuclear translocation was reconstituted with activation of a PKC-independent pathway by TNF-alpha or when PKCtheta was overexpressed. Importantly, neither the conversion of ceramide to complex glycosphingolipids, which are known to have immunosuppressive effects, nor its hydrolysis to sphingosine, a known inhibitor of PKC, was necessary for its inhibitory activity. These results indicate that ceramide plays a negative regulatory role in the activation of NF-kappaB and its targets as a result of inhibition of PKC.