Stearoyl-CoA desaturase (SCD) has recently been shown to be a critical control point of lipid partitioning and body weight regulation. Lack of SCD1 function significantly increases insulin sensitivity in skeletal muscles and corrects the hypometabolic phenotype of leptin-deficient ob/ob mice, indicating the direct antilipotoxic action of SCD1 deficiency. The mechanism underlying the metabolic effects of SCD1 mutation is currently unknown. Here we show that SCD1 deficiency reduced the total ceramide content in oxidative skeletal muscles (soleus and red gastrocnemius) by approximately 40%. The mRNA levels and activity of serine palmitoyltransferase (SPT), a key enzyme in ceramide synthesis, as well as the incorporation of [14C]palmitate into ceramide were decreased by approximately 50% in red muscles of SCD1-/- mice. The content of fatty acyl-CoAs, which contribute to de novo ceramide synthesis, was also reduced. The activity and mRNA levels of carnitine palmitoyltransferase I (CPT I) and the rate of beta-oxidation were increased in oxidative muscles of SCD1-/- mice. Furthermore, SCD1 deficiency increased phosphorylation of AMP-activated protein kinase (AMPK), suggesting that AMPK activation may be partially responsible for the increased fatty acid oxidation and decreased ceramide synthesis in red muscles of SCD1-/- mice. SCD1 deficiency also reduced SPT activity and ceramide content and increased AMPK phosphorylation and CPT I activity in muscles of ob/ob mice. Taken together, these results indicate that SCD1 deficiency reduces ceramide synthesis by decreasing SPT expression and increasing the rate of beta-oxidation in oxidative muscles.