Evidence has consistently indicated that activation of sphingomyelinases and/or ceramide synthases and the resulting accumulation of ceramide mediate cellular responses to stressors such as lipopolysaccharide, interleukin 1beta, tumor necrosis factor alpha, serum deprivation, irradiation and various antitumor treatments. Recent studies had identified the genes encoding most of the enzymes responsible for the generation of ceramide and ongoing research is aimed at characterizing their individual functions in cellular response to stress. This chapter discusses the seminal and more recent discoveries in regards to the pathways responsible for the accumulation of ceramide during stress and the mechanisms by which ceramide affects cell functions. The former group includes the roles of neutral sphingomyelinase 2, serine palmitoyltransferase, ceramide synthases, as well as the secretory and endosomal/lysosomal forms of acid sphingomyelinase. The latter summarizes the mechanisms by which ceramide activate its direct targets, PKCzeta, PP2A and cathepsin D. The ability of ceramide to affect membrane organization is discussed in the light of its relevance to cell signaling. Emerging evidence to support the previously assumed notion that ceramide acts in a strictly structure-specific manner are also included. These findings are described in the context of several physiological and pathophysiological conditions, namely septic shock, obesity-induced insulin resistance, aging and apoptosis of tumor cells in response to radiation and chemotherapy.