Inositolsphingolipid phospholipase C (Isc1p) is theCeramide is a bioactive lipid that in eukaryotic cells functions as a mediator of a variety of extracellular signals through the regulation of several downstream effectors which in turn control basic cellular functions such as cell growth, cell cycle arrest, apoptosis, and senescence (1-6). Sphingomyelinases, which hydrolyze the phosphodiester linkage of sphingomyelin (SM) 1 to produce ceramide and phosphorylcholine, function as key regulators of the intracellular levels of ceramide in mammalian cells.Sphingolipids are also important regulatory molecules in yeast where they are known to be required for viability (7), optimal life span (8), cell cycle regulation (9), endocytosis (10), and regulation of responses of yeast cells to stress (1, 11). Although Saccharomyces cerevisiae do not contain SM, they do contain inositol phosphoceramides, and recently we identified a homologue of neutral sphingomyelinase in S. cerevisiae, Isc1p, which acts on phosphoceramides to generate ceramide. This enzyme displays ϳ30% identity to neutral sphingomyelinase 2 and shares with it several common features (12) including hydrolytic activity on SM, the requirement of Mg 2ϩ for optimal activity, optimal neutral pH, and the presence of a newly discovered domain that is conserved in the entire family of sphingomyelinases, the P-loop-like domain (13), which appears to be important for substrate binding and/or catalysis.In addition, both enzymes demonstrate an absolute requirement for anionic phospholipids for in vitro activation. Thus, Isc1p is activated selectively in vitro by cardiolipin (CL), phosphtidylglycerol (PG), or phosphatidylserine. In a recent study we demonstrated that the enzyme binds these anionic phospholipids, and we identified the second transmembrane domain and the C terminus of Isc1p as required for this binding, and it was proposed that this interaction plays a critical role in enzyme function through a novel tethering mechanism of enzyme activation by lipid cofactors (14).Given these specific requirements for anionic phospholipids in vitro, it became important to determine whether the enzyme requires phospholipids for activation in vivo. Our attention was particularly directed to the possible roles of PG and CL as the deletion of PGS1, the gene that encodes the enzyme responsible for the synthesis of PG phosphate, and subsequent synthesis of PG and CL was shown to cause a late defect during growth in glucose media similar to that of ISC1. Moreover, these lipids are almost exclusively present in mitochondria, and we have shown recently that Isc1p localizes preferentially to mitochondria in the post-diauxic phase of growth.Synthesis of CL in yeast requires three sequential reactions.