Isolated human plasma low density lipoprotein (LDL) was observed to possess sphingomyelinase activity. Accordingly, the formation of ceramide was catalyzed by LDL at 37 degrees C using tertiary liposomes composed of sphingomyelin (mole fraction (x) = 0.2), 1-palmitoyl-2-oleoyl-sn-glycero-3-phosphocholine (x = 0.7), 1, 2-dimyristoyl-sn-glycero-3-phospho-rac-glycerol (x = 0.1), and either the fluorescent sphingomyelin analog Bodipy-sphingomyelin or [(14)C]sphingomyelin as substrates. However, this activity was not present in either very low density lipoprotein or the high density lipoprotein subfractions HDL(2) and HDL(3). Oxidation of LDL abrogated its sphingomyelinase activity. Aggregation of the liposomes upon incubation with LDL was evident from the light scattering measurements. Microinjection of LDL to the surface of giant liposomes composed of 1-stearoyl-2-oleoyl-sn-glycero-3-phosphocholine (SOPC), N-palmitoyl-d-sphingomyelin (C16:0-sphingomyelin), and Bodipy-sphingomyelin as a fluorescent tracer (0.75:- 0.20:0.05, respectively) revealed the induction of vectorial budding of vesicles, resembling endocytosis.