Inflammation accompanied by severe oxidative stress plays a vital role in the orchestration and progression of neurodegeneration prevalent in chronic and acute central nervous system pathologies as well as in aging. The proinflammatory cytokine tumor necrosis factor-α (TNFα) elicits the formation of the bioactive ceramide by stimulating the hydrolysis of the membrane lipid sphingomyelin by sphingomyelinase activities. Ceramide stimulates the formation of reactive oxygen species (ROS) and apoptotic mechanisms in both neurons and nonneuronal cells, establishing a link between sphingolipid metabolism and oxidative stress. We demonstrated in SH-SY5Y human neuroblastoma cells and primary cortical neurons that TNFα is a potent stimulator of Mg(2+) -dependent neutral sphingomyelinase (Mg(2+) -nSMase) activity, and sphingomyelin hydrolysis, rather than de novo synthesis, was the predominant source of ceramide increases. Mg(2+) -nSMase activity preceded an accumulation of ROS by a neuronal NADPH oxidase (NOX). Notably, TNFα provoked an NOX-dependent oxidative damage to sphingosine kinase-1, which generates sphingosine-1-phosphate, a ceramide metabolite associated with neurite outgrowth. Indeed, ceramide and ROS inhibited neurite outgrowth of dorsal root ganglion neurons by disrupting growth cone motility. Blunting ceramide and ROS formation both rescued sphingosine kinase-1 activity and neurite outgrowth. Our studies suggest that TNFα-mediated activation of Mg(2+) -nSMase and NOX in neuronal cells not only produced the neurotoxic intermediates ceramide and ROS but also directly antagonized neuronal survival mechanisms, thus accelerating neurodegeneration.