In [3H]serine-labelled granulosa cells treatment with TNF alpha (10 ng/ml) resulted in a transient decrease in cellular [3H]sphingomyelin and generation of [3H]ceramide that remained elevated 60 min later. In cells labelled with [methyl-14C]choline, TNF alpha induced a similar reduction in [14C]sphingomyelin content that was accompanied by a sustained elevation in [14C]phosphorylcholine levels. In FSH-primed cells, TNF alpha inhibited P450-AROM activity in a dose-dependent manner, an effect that was also observed in cells treated with bacterial sphingomyelinase (SMase 0.003-0.3 U/ml) or increasing concentrations (0.1-10 microM) of N-acetylsphingosine (C2-cer) a membrane-permeable analogue of ceramide. These results support the notion that sphingomyelin degradation to a bioeffector molecule ceramide, may be an early event involved in TNF alpha-induced signal transduction in granulosa cells.