Tissue transglutaminase (tTG) catalyzes a Ca2+-dependent transglutaminase reaction resulting in the formation of gamma-glutamyl-epsilon-lysine bonds and is activated during apoptosis to catalyze the formation of apoptotic body. We investigate whether lipids that are membrane components and involved in cell signaling could modify the Ca2+-dependent activation of tTG. We found that sphingosylphosphocholine (lyso-SM) was the only lipid to activate transglutaminase at low Ca2+ concentrations. In the presence of lyso-SM (125 microM), transglutaminase was detectable at 10 microM Ca2+, whereas in the absence of lyso-SM, similar activity was obtained at 160 microM Ca2+. Furthermore, in the presence of lipid vesicles lyso-SM retained the ability to enhance the Ca2+-dependent activation of tTG. Lyso-SM did not significantly change the Km for the glutamyl and primary amine substrates. However, the Kact for Ca2+ was reduced from 300 microM to 90 microM. Structure-function studies of lyso-SM analogs indicate that phosphocholine group on C1, the free amino group at C2 and a C4-C5 double bond are critical for the activation of transglutaminase activity. This is the first demonstration that a specific sphingolipid could enhance the activity of tTG and could play a role in vivo in activation of the tTG at physiologic Ca2+ levels.