Neutral sphingomyelinase (NSMase) has been proposed to mediate interleukin (IL)-1beta signaling in liver. In this paper, we used adenovirus-mediated gene transfer to inducibly express FLAG-tagged mouse NSMase-2 in primary rat hepatocytes in order to further elucidate the molecular nature of the NSMase involved. Initial studies confirmed that the EST clone used in these experiments encoded a Mg2+-dependent NSMase. The in vitro activity of the heterologously expressed enzyme was inhibited in the presence of 0.5% Triton or 50 mM EDTA. In addition, the expression of this NSMase-2 clone in primary hepatocytes led to increased cellular levels of ceramide, indicating that the enzyme is active in situ. Immunofluorescence studies in Hep G2 cells infected with NSMase-2 expressing adenoviruses showed that the FLAG-tagged NSMase-2 was localized to the plasma membrane. Cell viability remained unchanged 72 h following infection and induction. The effect of NSMase-2 expression on IL-1beta-induced activation of c-Jun N-terminal kinase (JNK) was tested. Expression of NSMase-2 increased JNK phosphorylation between 1.5- and 2-fold over the basal level. Furthermore, NSMase-2 was found to strongly increase the ability of IL-1beta to phosphorylate JNK. This potentiation was mediated by a phosphatase from the PP2A family, possibly by modulating the phosphorylation pattern of IL-1beta receptor-associated kinase (IRAK). In conclusion, the data presented suggest that NSMase-2 could be involved in IL-1beta-induced JNK activation in hepatocytes.