Ceramide activates a cytosolic protein phosphatase present in rat T9 glioma cells and rat brain. Ceramide-activated protein phosphatase (CAPP) was found to share several properties with protein phosphatase 2A (PP2A) leading to the hypothesis that ceramide may directly activate PP2A. PP2A was isolated as a heterotrimer (AB'C, AB alpha C), heterodimer (AC), or free C subunit, and the effect of ceramide on the catalytic activity was assessed. C2-ceramide, 5-20 microM, activated heterotrimeric PP2A up to 3.5-fold but had no effect on the activity of AC or C. Ceramides possessing hexanoyl, decanoyl, and myristoyl but not stearoyl acyl chains also activated heterotrimeric PP2A. Ceramide activation of heterotrimeric PP2A required the presence of a B subunit since trypsinization or heparin treatment abolished ceramide activation. Activation of heterotrimeric PP2A was specific for ceramide because related sphingolipids had no effect. Moreover, dihydro-C2-ceramide, which lacks the trans double bond in the sphingoid base, inhibited AB'C activity by > 90% at 10 microM. The specificity of activation of AB'C and AB alpha C by stereoisomers of C2-ceramide was found to differ. Whereas activation of AB'C by either DL-erythro- or threo-C2-ceramide was similar, AB alpha C was activated by either D- or L-erythro-C2-ceramide but not by the threo isomers. CAPP isolated from T9 cells was most effectively activated by D-erythro-C2-ceramide. CAPP was found to possess two peaks of ceramide activated phosphatase activity. The initial peak of activity was coincident with the elution of AB'C and was stimulated 1.8-fold by 20 microM C2-ceramide. A second peak of phosphatase activity was negligible in the absence of ceramide but was stimulated 5.5-fold by 20 microM C2-ceramide. These results support the hypothesis that ceramide is a specific lipid second messenger modulating heterotrimeric PP2A activity.