Lag1p and Lac1p are two highly homologous membrane proteins of the endoplasmic reticulum (ER). When both genes are deleted, cells cannot transport glycosylphosphatidylinositol (GPI)-anchored proteins from the ER to the Golgi at a normal rate. Here we show that microsomes or detergent extracts from lag1lac1 double mutants lack an activity transferring C26 fatty acids from C26-coenzyme A onto dihydrosphingosine or phytosphingosine. As a consequence, in intact cells, the normal ceramides and inositolphosphorylceramides are drastically reduced. lag1lac1 cells compensate for the lack of normal sphingolipids by making increased amounts of C26 fatty acids, which become incorporated into glycerophospholipids. They also contain 20- to 25-fold more free long chain bases than wild type and accumulate very large amounts of abnormally polar ceramides. They make small amounts of abnormal mild base-resistant inositolphospholipids. The lipid remodelling of GPI-anchored proteins is severely compromised in lag1lac1 double mutants since only few and mostly abnormal ceramides are incorporated into the GPI anchors. The participation of Lag1p and Lac1p in ceramide synthesis may explain their role in determining longevity.