Sphingolipids play important roles in regulating cellular responses. Although mitochondria contain sphingolipids, direct regulation of their levels in mitochondria or mitochondria-associated membranes is mostly unclear. Neutral SMase (N-SMase) isoforms, which catalyze hydrolysis of sphingomyelin (SM) to ceramide and phosphocholine, have been found in the mitochondria of yeast and zebrafish, yet their existence in mammalian mitochondria remains unknown. Here, we have identified and cloned a cDNA based on nSMase homologous sequences. This cDNA encodes a novel protein of 483 amino acids that displays significant homology to nSMase2 and possesses the same catalytic core residues as members of the extended N-SMase family. A transiently expressed V5-tagged protein co-localized with both mitochondria and endoplasmic reticulum markers in MCF-7 and HEK293 cells; accordingly, the enzyme is referred to as mitochondria-associated nSMase (MA-nSMase). MA-nSMase was highly expressed in testis, pancreas, epididymis, and brain. MA-nSMase had an absolute requirement for cations such as Mg(2+) and Mn(2+) and activation by the anionic phospholipids, especially phosphatidylserine and the mitochondrial cardiolipin. Importantly, overexpression of MA-nSMase in HEK293 cells significantly increased in vitro N-SMase activity and also modulated the levels of SM and ceramide, indicating that the identified cDNA encodes a functional SMase. Thus, these studies identify and characterize, for the first time, a mammalian MA-nSMase. The characterization of MA-nSMase described here will contribute to our understanding of pathways regulated by sphingolipid metabolites, particularly with reference to the mitochondria and associated organelles.