Cholera toxin (CT) enters host cells by binding to ganglioside GM1 in the apical plasma membrane (PM). GM1 carries CT retrograde from the PM to the endoplasmic reticulum (ER), where a portion of the toxin, the A1-chain, retro-translocates to the cytosol, causing disease. Trafficking in this pathway appears to depend on the association of CT-GM1 complexes with sphingomyelin (SM)- and cholesterol-rich membrane microdomains termed lipid rafts. Here, we find that in polarized intestinal epithelia, the conversion of apical membrane SM to ceramide by bacterial sphingomyelinase attenuates CT toxicity, consistent with the lipid raft hypothesis. The effect is reversible, specific to toxin entry via the apical membrane, and recapitulated by the addition of exogenous long-chain ceramides. Conversion of apical membrane SM to ceramide inhibits the efficiency of toxin endocytosis, but retrograde trafficking from the apical PM to the Golgi and ER is not affected. This result suggests that the cause for toxin resistance occurs at steps required for retro-translocation of the CT A1-chain to the cytosol.