Neutral sphingomyelinases sphingomyelin phosphodiesterase (SMPD)2 and -3 hydrolyze sphingomyelin to phosphocholine and ceramide. smpd2 is expressed ubiquitously, and smpd3 is expressed predominantly in neurons of the CNS. Their activation and the functions of the released ceramides have been associated with signaling pathways in cell growth, differentiation, and apoptosis. However, these cellular responses remain poorly understood. Here we describe the generation and characterization of the smpd3(-/-) and smpd2(-/-)smpd3(-/-) double mutant mouse, which proved to be devoid of neutral sphingomyelinase activity. SMPD3 plays a pivotal role in the control of late embryonic and postnatal development: the smpd3-null mouse develops a novel form of dwarfism and delayed puberty as part of a hypothalamus-induced combined pituitary hormone deficiency. Our studies suggest that SMPD3 is segregated into detergent-resistant subdomains of Golgi membranes of hypothalamic neurosecretory neurons, where its transient activation modifies the lipid bilayer, an essential step in the Golgi secretory pathway. The smpd3(-/-) mouse might mimic a form of human combined pituitary hormone deficiency.