Tumor necrosis factor α (TNFα) is a well known cytokine involved in systemic and acute inflammation. In this study, we demonstrate that ceramide 1-phosphate (C1P) produced by ceramide kinase (CERK) is a negative regulator of LPS-induced TNFα secretion. Specifically, bone marrow-derived macrophages isolated from CERK knock-out mice (CERK(-/-)) generated higher levels of TNFα than the wild-type mice (CERK(+/+)) in response to LPS. An increase in basal TNFα secretion was also observed in CERK(-/-) murine embryonic fibroblasts, which was rescued by re-expression of wild-type CERK. This effect was due to increased secretion and not transcription. The secretion of TNFα is regulated by TNFα-converting enzyme (TACE also known as ADAM17), and importantly, the activity of TACE was higher in cell extracts from CERK(-/-) as compared with wild type. In vitro analysis also demonstrated that C1P is a potent inhibitor of this enzyme, in stark contrast to ceramide and sphingosine 1-phosphate. Furthermore, TACE specifically bound C1P with high affinity. Finally, several putative C1P-binding sites were identified via homology throughout the protein sequence of TACE. These results indicate that C1P produced by CERK has a negative effect on the processing/secretion of TNFα via modulation of TACE activity.