Sphingomyelin hydrolysis and ceramide generation catalyzed by sphingomyelinases (SMase) are key components of the signaling pathways in cytokine- and stress-induced cellular responses. In this study, we report the partial purification and characterization of the membrane bound, neutral pH optimal, and magnesium-dependent SMase (N-SMase) from rat brain. Proteins from Triton X-100 extract of brain membrane were purified sequentially with DEAE-Sephacel, heparin-Sepharose, ceramic hydroxyapatite, Mono Q, phenyl-Superose, and Superose 12 column chromatography. After eight purification steps, the specific activity of the enzyme increased by 3030-fold over the brain homogenate. The enzyme hydrolyzed sphingomyelin but not phosphatidylcholine and its activity was dependent upon magnesium with an optimal pH of 7.5 and a native pI of 5.2. Delipidation of the enzyme through chromatographic purification or by extraction with 3-[(3-cholamidopropyl)dimethylammonio]-1-propanesulfonic acid followed by gel filtration revealed that the enzyme became increasingly dependent on phosphatidylserine (PS). Up to 20-fold stimulation was observed with PS whereas other lipids examined were either ineffective or only mildly stimulatory. The Km of the enzyme for substrate sphingomyelin (3.4 mol %) was not affected by PS. The highly purified enzyme was inhibited by glutathione with a >95% inhibition observed with 3 mM glutathione and with a Hill number calculated at approximately 8. The significance of these results to the regulation of N-SMase is discussed.