The alphavirus Sindbis virus (SINV) causes encephalomyelitis in mice. Lipid-containing membranes, particularly cholesterol and sphingomyelin (SM), play important roles in virus entry, RNA replication, glycoprotein transport, and budding. Levels of SM are regulated by sphingomyelinases (SMases). Acid SMase (ASMase) deficiency results in the lipid storage disease type A Niemann-Pick disease (NPD-A), mimicked in mice by interruption of the ASMase gene. We previously demonstrated that ASMase-deficient mice are more susceptible to fatal SINV encephalomyelitis, with increased viral replication, spread, and neuronal death. To determine the mechanisms by which ASMase deficiency enhances SINV replication, we compared NPD-A fibroblasts (NPAF) to normal human fibroblasts (NHF). NPAF accumulated cholesterol- and sphingolipid-rich late endosomes/lysosomes in the perinuclear region. SINV replication was faster and reached higher titer in NPAF than in NHF, and NPAF died more quickly. SINV RNA and protein synthesis was greater in NHF than in NPAF, but virions budding from NPAF were 26 times more infectious and were regular dense particles whereas virions from NHF were larger particles containing substantial amounts of CD63. Cellular regulation of alphavirus morphogenesis is a previously unrecognized mechanism for control of virus replication and spread.