Sphingomyelin turnover may play an important role in cellular differentiation and proliferation. The effects of dexamethasone on sphingomyelin hydrolysis, and the role of ceramide, the immediate product of sphingomyelin hydrolysis were studied in Swei B-lymphoblastoid cell growth. Treatment of Swei cells with $1{mu}M$ dexamethasone resulted in time-dependent hydrolysis of sphingomyelin. Dexamethasone inhibited cell growth and decreased the c-myc mRNA level. A cell-permeable $C_2$-ceramide mimicked the effects of dexamethasone on growth inhibiton and c-myc gene expression. These results suggest that sphingomyelin hydrolysis is involved in the regulation of dexamethasone-induced growth inhibition.