Cell differentiation and myelination involve a fine balance between stasis and programmed cell death, yet the genes that regulate this have not been clearly defined. We therefore studied two key gene products involved in oligodendrocyte plasma membrane lipid metabolism and their antagonistic role in ceramide-mediated cell death signaling. Overexpression of palmitoyl:protein thioesterase (PPT1; verified by Western blot of the V5-tagged protein and increased enzyme activity) resulted in decreased ceramide in the detergent-resistant microdomain (DRM, or raft) relative to cholesterol and sphingomyelin (SM). This PPT1 overexpression also resulted in protection against cell death induced by either staurosporine or C(2)-ceramide. In contrast, overexpression of neutral sphingomyelinase 2 (NSMase2; verified by Western blot of the FLAG-tagged protein and increased enzyme activity) resulted in increased membrane NSMase and increased ceramide in rafts relative to cholesterol and SM. The difference in SM and ceramide turnover was quantitated by [(3)H]palmitate pulse-chase labeling. Furthermore, when NBD-SM was added to cells, it was hydrolyzed by NSMase-transfected cells at more than twofold the rate in untransfected cells. NSMase2 overexpression enhanced cell death induced by staurosporine or C(2)-ceramide, in contrast to the protective effect of PPT1 overexpression. The presence of a fraction of both PPT1 and NSMase2 in rafts together with their substrates (palmitoylated proteins and SM, respectively) suggests a mechanism for dynamic palmitoylation/depalmitoylation of certain proteins in controlling cell death via NSMase activation.