The mechanism by which genes involved in cholesterol biosynthesis and import are preferentially up-regulated in response to sterol depletion was elucidated with the cloning of sterol regulatory element binding protein-1 (SREBP-1). SREBP-1 is a transcription factor whose entry into the nucleus is gated by sterol-regulated proteolysis. We have investigated the role of tumor necrosis factor-alpha (TNF-alpha) as a mediator of SREBP-1 maturation in human hepatocytes. TNF-alpha is capable of inducing SREBP-1 maturation in a time- and dose-dependent manner that is consistent with the kinetics of TNF-alpha-mediated activation of neutral sphingomyelinase (N-SMase). Antibodies to N-SMase inhibit TNF-alpha-induced SREBP-1 maturation suggesting that N-SMase is a necessary component of this signal transduction pathway. Ceramide, a product of sphingomyelin hydrolysis, is also capable of inducing SREBP-1 maturation. The mature form of SREBP-1 generated by TNF-alpha, sphingomyelinase or ceramide treatment translocates to the nucleus and binds the sterol regulatory element. This promotes transcription of the gene upstream of the sterol regulatory element. A unique finding of our studies is that ceramide stimulated SREBP-1 maturation even in the presence of cholesterol and 25-hydroxycholesterol both of which are known suppressors of SREBP-1 maturation. Our findings indicate that ceramide-mediated maturation of SREBP-1 maturation is a novel sterol-independent mechanism by which cholesterol homeostasis may be regulated.