We measured the ability of sphingomyelin (SPM) to inhibit phosphatidylinositol 4,5-bisphosphate [PI(4,5)P2] hydrolysis catalyzed by human phospholipase C-delta 1 (PLC-delta 1) in model membranes and detergent phospholipid mixed micelles. SPM strongly inhibited PLC-delta 1 catalytic activity measured in large unilamellar vesicles (LUVs) composed of egg phosphatidylcholine (PC), PI(4,5)P2, and SPM from brain or egg. At 37 or 45 degrees C, the rate of PI(4,5)P2 hydrolysis in PC/SPM/PI(4,5)P2 vesicles (15:80:5 mol:mol) was less than 25% of that observed in PC/PI(4,5)P2 vesicles (95:5). By contrast, catalysis was only weakly inhibited by equivalent concentrations of the SPM analog, 3-deoxy-2-O-stearoyl-SPM, which lacks hydrogen bond-donating groups at the C-3 and C-2 positions of the sphingolipid backbone. Inhibition by SPM was not observed in detergent/phospholipid mixed micelles. The binding affinity of PLC-delta 1 for vesicles containing PC and PI(4,5)P2 was slightly diminished by inclusion of SPM in the lipid mixture, but not enough to account for the decreased rate of catalysis. We could find no evidence of specific binding of the enzyme to SPM, which argues against a simple negative allosteric mechanism. To understand the cause of inhibition, the effects of SPM and 3-deoxy-2-O-stearoyl-SPM on the bulk properties of the substrate bilayers were examined. Increasing the mole fraction of SPM altered the fluorescence emission spectra of two sets of head group probes, 6-lauronyl(N,N-dimethylamino)naphthalene and N-[5-(dimethylamino)naphthalene-1-sulfonyl]-1,2-dihexadecanoyl-sn- glycero-3-phosphoethanolamine, that are sensitive to water content at the membrane/solution interface. Results obtained with both probes suggested a reduction in hydration with increasing SPM content. Vesicles containing 3-deoxy-2-O-stearoyl-SPM produced intermediate changes. Our results are most consistent with a model in which SPM inhibits PLC by increasing interlipid hydrogen bonding and by decreasing membrane hydration; both factors raise the energy barrier for activation of PLC-delta 1 at the membrane/protein microinterface.