When the CD28 membrane glycoprotein of T cells binds to its ligand, a signal is transmitted that is required for T cell receptor-induced proliferation and cytokine secretion; T cells are not stimulated by the CD28 signal alone. Ligation of CD28 initiated sphingomyelin hydrolysis and generated ceramide. Treatment of T cells with either exogenous sphingomyelinase or a cell-permeable ceramide analogue, CB-ceramide, mimicked the CD28 signal by inducing T cell proliferation and interleukin-2 gene transcription. Stabilization of interleukin-2 mRNA was also observed in C-6-ceramide-treated cells. Thus, the sphingomyelin-ceramide pathway is a candidate for mediating the costimulatory signal.