We previously established a role for the second messenger ceramide in protein kinase R (PKR)-mediated articular cartilage degradation. Ceramide is known to play a dual role in collagen gene regulation, with the effect of ceramide on collagen promoter activity being dependent on its concentration. Treatment of cells with low doses of sphingomyelinase produces small increases in endogenous ceramide. We investigated whether ceramide influences articular chondrocyte matrix homeostasis and, if so, the role of PKR in this process. Bovine articular chondrocytes were stimulated for 7 days with sphingomyelinase to increase endogenous levels of ceramide. To inhibit PKR, 2-aminopurine was added to duplicate cultures. De novo sulphated glycosaminoglycan and collagen synthesis were measured by adding [35S]-sulphate and [3H]-proline to the media, respectively. Chondrocyte phenotype was investigated using RT-PCR and Western blot analysis. Over 7 days, sphingomyelinase increased the release of newly synthesized sulphated glycosaminoglycan and collagen into the media, whereas inhibition of PKR in sphingomyelinase-treated cells reduced the level of newly synthesized sulphated glycosaminoglycan and collagen. Sphingomyelinase treated chondrocytes expressed col2a1 mRNA, which is indicative of a normal chondrocyte phenotype; however, a significant reduction in type II collagen protein was detected. Therefore, small increments in endogenous ceramide in chondrocytes appear to push the homeostatic balance toward extracellular matrix synthesis but at the expense of the chondrocytic phenotype, which was, in part, mediated by PKR.