Lipopolysaccharide (LPS) and interferon-gamma (IFN) treatment of C6 rat glioma cells increased the intracellular ceramide level and the expression of the inducible nitric oxide synthase (iNOS) gene. To delineate the possible role of ceramide in the induction of iNOS, we examined the source of intracellular ceramide and associated signal transduction pathway(s) with the use of inhibitors of intracellular ceramide generation. The inhibitor of neutral sphingomyelinase (3-O-methylsphingomyelin, MSM) inhibited the induction of iNOS, whereas inhibitor of acidic sphingomyelinase (SR33557) or that of ceramide de novo synthesis (fumonisin B1) had no effect on the induction of iNOS. MSM-mediated inhibition of iNOS induction was reversed by the supplementation of exogenous C8-ceramide, suggesting that ceramide production by neutral sphingomyelinase (nSMase) is a key mediator in the induction of iNOS. The MSM-mediated inhibition of iNOS gene expression correlated with the decrease in the activity of ras. Inhibition of co-transfected iNOS promoter activity by dominant negative ras supported the role of ras in the nSMase-dependent regulation of iNOS gene. NF-kappaB DNA binding activity and its transactivity were also reduced by MSM pretreatment, and were completely reversed by the supplementation of C8-ceramide. As the dominant negative ras also reduced NF-kappaB transactivity, NF-kappaB activation may be downstream of ras. Our results suggest that ceramide generated by nSMase may be a critical mediator in the regulation of iNOS gene expression via ras-mediated NF-kappaB activation under inflammatory conditions.