Niemann-Pick disease types A and B are two clinical forms of an inherited lysosomal storage disorder characterized by accumulation of sphingomyelin due to deficient activity of the lysosomal enzyme, acid sphingomyelinase. Patients with both types have hepatosplenomegaly, but only those with type A have nervous system involvement leading to death in early infancy. The residual activities of lysosomal sphingomyelinase in types A and B have never been well characterized because of limitations in both in vitro enzymatic assays and loading tests on intact cells. To evaluate the effective level of sphingomyelinase activity, intact, living cultured Epstein-Barr virus-transformed lymphoid cells were incubated with a radiolabeled sphingomyelin that was first associated to human low-density lipoproteins. This lipoprotein-associated sphingomyelin was targeted to lysosomes, thereby permitting selective hydrolysis by the lysosomal sphingomyelinase. Short-term pulse-chase experiments allowed the determination of the initial rates of degradation; in normal cells, the half-time of sphingomyelin degradation averaged 4.5 h. Whereas cells from the severe neuronopathic type A form of Niemann-Pick disease exhibited about 0.15% residual sphingomyelinase activity, cells from patients with the visceral type B form exhibited about 4%, i.e., 27 times more. Cells from heterozygous Niemann-Pick subjects showed about 70% residual activity. These results provide the first approach to measuring the effective activity of a lysosomal enzyme and represent an accurate method for the differential diagnosis of Niemann-Pick disease types A and B. They also support the hypothesis of relationships among the effective in situ residual enzyme activity, the amount of stored substrate, and the severity of the ensuing lysosomal storage disorder.