For polymorphonuclear neutrophils (PMNs) to orient migration to chemotactic gradients, weak external asymmetries must be amplified into larger internal signaling gradients. Lipid mediators, associated with the plasma membrane and within the cell, participate in generating these gradients. This study examined the role in PMN chemotaxis of neutral sphingomyelinase (N-SMase), a plasma membrane-associated enzyme that converts sphingomyelin to ceramide. A noncompetitive N-SMase inhibitor, GW4869 (5 mM, 5 minutes), did not inhibit PMN motility (as percentage of motile cells, or mean cell velocity), but it abrogated any orientation of movement toward the source of the chemotaxin, formylmethionylleucylphenylanaline (FMLP) (net displacement along the gradient axis in micrometers, or as percentage of total migration distance). This defect could be completely reversed by treatment with lignoceric ceramide (5 μg/ml, 15 minutes). Immunolocalization studies demonstrated that N-SMase (1) distributes preferentially toward the leading edge of some elongated cells, (2) is associated with the plasma membrane, (3) is more than 99.5% localized to the cytofacial aspect of the plasma membrane, (4) is excluded from pseudopodial extensions, and (5) increases rapidly in response to FMLP. Morphologically, the inhibition of N-SMase limited cellular spreading and the extension of sheet-like pseudopods. Elongated PMNs demonstrated a polarized distribution of GTPases, with Rac 1/2 accumulated at, and RhoA excluded from, the front of the cell. This polarity was negated by N-SMase inhibition and restored by lignoceric ceramide. We conclude that N-SMase at the cytofacial plasma membrane is an essential element for the proper orientation of PMNs in FMLP gradients, at least in part by polarizing the distribution of Rac 1/2 and RhoA GTPases.