Extracellular agonists such as tumor necrosis factor-alpha (TNF-alpha) activate the sphingomyelin cycle leading to the generation of ceramide. Ceramide has been suggested as an important mediator of the effect of TNF-alpha on growth inhibition, c-myc down-regulation, apoptosis, and the activation of the nuclear factor kappa B. Although there is no clearly defined intracellular target for ceramide activity, previous studies have demonstrated the existence of a ceramide-activated protein phosphatase (CAPP) in vitro. Since c-myc is an early downstream cellular target for TNF-alpha, we examined the role of ceramide and CAPP in c-myc down-regulation. In intact HL-60 cells ceramide induced down-regulation of c-myc RNA levels. C2-ceramide was active at 1-10 microM and caused 40-80% inhibition of c-myc RNA levels at 30-120 min of treatment. In nuclear run-on studies, C2-ceramide induced a block to transcription elongation of the c-myc transcript without affecting transcription through the first exon. Therefore, ceramide appeared to inhibit c-myc expression via a mechanism identical with that of TNF-alpha. HL-60 cells contained CAPP which was inhibited by okadaic acid (0.1-10 nm). CAPP in HL-60 cells was activated by D-erythro-ceramide but not D-erythro-dihydroceramide. The specificity of activation of CAPP by ceramide in vitro was matched by a similar specificity of c-myc down-regulation in cells. Moreover, okadaic acid inhibited the effects of ceramide and TNF-alpha on c-myc down-regulation. On the other hand, okadaic acid did not inhibit the ability of phorbol 12-myristate 13-acetate to down-regulate c-myc, demonstrating the existence of at least two distinct pathways in the regulation of c-myc expression. These results demonstrate that CAPP is important for ceramide-induced down-regulation of c-myc in myeloid leukemia cells. The implications of these findings in further delineating a sphingomyelin signaling pathway with important anti-proliferative effects are discussed.