Sphingomyelin synthase (SMS) produces sphingomyelin while consuming ceramide (a negative regulator of cell proliferation) and forming diacylglycerol (DAG) (a mitogenic factor). Therefore, enhanced SMS activity could favor cell proliferation. To examine if dysregulated SMS contributes to leukemogenesis, we measured SMS activity in several leukemic cell lines and found that it is highly elevated in K562 chronic myelogenous leukemia (CML) cells. The increased SMS in K562 cells was caused by the presence of Bcr-abl, a hallmark of CML; stable expression of Bcr-abl elevated SMS activity in HL-60 cells while inhibition of the tyrosine kinase activity of Bcr-abl with Imatinib mesylate decreased SMS activity in K562 cells. The increased SMS activity was the result of up-regulation of the Sms1 isoform. Inhibition of SMS activity with D609 (a pharmacological SMS inhibitor) or down-regulation of SMS1 expression by siRNA selectively inhibited the proliferation of Bcr-abl-positive cells. The inhibition was associated with an increased production of ceramide and a decreased production of DAG, conditions that antagonize cell proliferation. A similar change in lipid profile was also observed upon pharmacological inhibition of Bcr-abl (K526 cells) and siRNA-mediated down-regulation of BCR-ABL (HL-60/Bcr-abl cells). These findings indicate that Sms1 is a downstream target of Bcr-abl, involved in sustaining cell proliferation of Bcr-abl-positive cells.