Ceramide is a lipid second messenger that mediates the effects of tumor necrosis factor alpha and other agents on cell growth and differentiation. Ceramide is believed to act via activation of protein phosphatase, proline-directed protein kinase, or protein kinase C. Tumor necrosis factor alpha-induced common pathway of apoptosis is associated with an early impairment of mitochondria. Herein, we demonstrate that ceramide can directly inhibit mitochondrial respiratory chain function. In isolated mitochondria, a rapid decline of mitochondrial oxidative phosphorylation occurs in the presence of N-acetylsphingosine (C2-ceramide), a synthetic cell-permeable ceramide analog. An investigation of the site of ceramide action revealed that the activity of respiratory chain complex III is reduced by C2-ceramide with half-maximum effect at 5-7 microM. In contrast, N-acetylsphinganine (C2-dihydroceramide), which lacks a functionally critical double bond and is ineffective in cells, did not alter mitochondrial respiration or complex III activity. We suggest that these in vitro observations may set the stage for identifying a novel mechanism of regulation of mitochondrial function in vivo.