Previously, we demonstrated that there is a marked reduction in the amount of ceramide in the stratum corneum of both lesional and nonlesional forearms in atopic dermatitis (AD), suggesting that an insufficiency of ceramides in the stratum corneum is an etiologic factor in atopic dry and barrier-disrupted skin. In this study, we investigated, as a possible mechanism involved in the ceramide deficiency, whether sphingomyelin (SM) metabolism is altered in AD as compared to normal controls. In stripped stratum corneum and biopsied whole epidermis of patients with AD, SM hydrolysis as measured at pH 4.7 using [choline-methyl-14C]sphingomyelin as a substrate were markedly increased by 27- and 7-fold, respectively. Radio-thin-layer chromatography of the reaction products revealed that, whereas the SM hydrolysis in age-matched normal controls were associated with sphingomyelinase (SMase) that degrades SM to yield ceramides and phosphorylcholine (PC), most of the SM hydrolysis detected in AD were attributable not to the SMase but to a hitherto undiscovered epidermal enzyme, SM acylase, which releases free fatty acid and sphingosyl-PC (Sph-PC) instead of ceramides. The potential of this acylase-like enzyme to generate Sph-PC through SM hydrolysis was corroborated by thin-layer chromatographic analysis of the reaction products obtained using porcine kidney acylase, followed by high-performance liquid chromatography-mass spectrometry. Furthermore, Sph-PC was also detected by high-performance liquid chromatography-mass spectrometry after incubation of SM with atopic stratum corneum samples. On the other hand, the stratum corneum of patients with contact dermatitis or chronic eczema exhibited neither increased SM hydrolysis nor the generation of Sph-PC upon radio-thin-layer chromatographic analysis. These findings suggest that SM metabolism is altered in AD, resulting in a decrease in levels of ceramides, which could be an etiologic factor in the continuous generation of atopic dry and barrier disrupted skin observed in AD.