NK and NKT cells play a major role in both innate immunity and in influencing the development of adaptive immune responses. CD161 (human NKR-P1A), a protein encoded in the NK gene complex, is a major phenotypic marker of both these cell types and is thought to be involved in the regulation of NK and NKT cell function. However, the mechanisms of action and signaling pathways of CD161 are poorly understood. To identify molecules able to interact with the cytoplasmic tail of human CD161 (NKR-P1A), we have conducted a yeast two-hybrid screen and identified acid sphingomyelinase as a novel intracellular signaling pathway linked to CD161. mAb-mediated cross-linking of CD161, in both transfectants and primary human NK cells, triggers the activation of acid, but not neutral sphingomyelinase. The sphingomyelinases represent the catabolic pathway for N-acyl-sphingosine (ceramide) generation, an emerging second messenger with key roles in the induction of apoptosis, proliferation, and differentiation. These data therefore define a novel signal transduction pathway for the CD161 (NKR-P1A) receptor and provide fresh insights into NK and NKT cell biology.