Two genes encoding neutral sphingomyelinases-1 and -2 (sphingomyelin phosphodiesterases-2 and -3) have been recently identified that hydrolyze sphingomyelin to phosphorylcholine and ceramide. Data bank searches using a peptide sequence derived from a previously purified bovine neutral sphingomyelinase (nSMase) allowed us to identify a cDNA encoding a novel human sphingomyelinase, nSMase3, that shows only a little homology to nSMase1 and -2. nSMase3 was biochemically characterized by overexpression in a yeast strain, JK9-3ddeltaIsc1p, lacking endogenous SMase activity. Similar to nSMase2, nSMase3 is Mg2+-dependent and shows optimal activity at pH 7, which is enhanced in the presence of phosphatidylserine and inhibited by scyphostatin. nSMase3 is ubiquitously expressed as a 4.6-kb mRNA species. nSMase3 lacks an N-terminal signal peptide, yet contains a 23-amino-acid transmembrane domain close to the C terminus, which is indicative for the family of C-tail-anchored integral membrane proteins. Cellular localization studies with hemagglutinin-tagged nSMase3 demonstrated colocalization with markers of the endoplasmic reticulum as well as with Golgi markers. Tumor necrosis factor stimulates rapid activation of nSMase3 in MCF7 cells with peak activity at 1.5 min, which was impaired by expression of dominant negative FAN.