Acid ceramidase (N-acylsphingosine deacylase, EC 3.5.1.23; AC) is the lipid hydrolase responsible for the degradation of ceramide into sphingosine and free fatty acids within lysosomes. The enzymatic activity was first identified over four decades ago and is deficient in two rare inherited disorders, Farber lipogranulomatosis (Farber disease) and spinal muscular atrophy with myoclonic epilepsy (SMA-PME). Importantly, AC not only hydrolyzes ceramide into sphingosine within acidic compartments, but also can synthesize ceramide from sphingosine at neutral pH, suggesting that the enzyme may have diverse functions depending on its subcellular location and the local pH. Within cells, AC exists in a complex with other lipid hydrolases and requires a polypeptide cofactor (saposin D) for full hydrolytic activity. Recent studies also have shown that AC is overexpressed in several human cancers, and that inhibition of this enzyme may be a useful cancer drug target. Aberrant AC activity has also been described in several other common diseases. The cDNA and gene (ASAH1) encoding AC have been isolated, several mouse models of AC deficiency have been constructed, and the recombinant enzyme is currently being manufactured for the treatment of Farber disease and SMA-PME. Current information concerning the biology of this enzyme and its role in human disease is reviewed within.