Sphingomyelinase C (SMase) inhibits CFTR chloride channel activity in multiple cell systems, an effect that could exacerbate disease in CF and COPD patients. The mechanism by which sphingomyelin catalysis inhibits CFTR is not known but evidence suggests that it occurs independently of CFTR's regulatory "R" domain. In this study we utilized the Xenopus oocyte expression system to shed light on how CFTR channel activity is reduced by SMase. We found that the pathway leading to inhibition is not membrane delimited and that inhibited CFTR channels remain at the cell membrane, indicative of a novel silencing mechanism. Consistent with an effect on CFTR gating behavior, we found that altering gating kinetics influenced the sensitivity to inhibition by SMase. Specifically, increasing channel activity by introducing the mutation K1250A or pretreating with the CFTR potentiator VX-770 (Ivacaftor) imparted resistance to inhibition. In primary bronchial epithelial cells, we found that basolateral, but not apical, application of SMase leads to a redistribution of sphingomyelin and a reduction in forskolin- and VX-770-stimulated currents. Taken together, these data suggest that SMase inhibits CFTR channel function by locking channels into a closed state and that endogenous CFTR in HBEs is affected by SMase activity.