Objective-Sphingolipid de novo biosynthesis is related to nonalcoholic fatty liver disease or hepatic steatosis. However, the mechanism is still unclear. Sphingomyelin synthase (SMS), using ceramide as one of the substrates to produce sphingomyelin, sits at the crossroads of sphingolipid biosynthesis. SMS has 2 isoforms: SMS1 and SMS2. SMS2 is the major isoform in liver. Approach and Results-To investigate the relationship between liver SMS2 activity-mediated sphingolipid changes and hepatic steatosis, we used 2 mouse models: Sms2 liver-specific transgenic and Sms2 knockout mice. We found that Sms2 liver-specific transgenic livers have lower ceramide and higher sphingomyelin, whereas Sms2 knockout livers have higher ceramide and lower sphingomyelin. We also found that liver Sms2 overexpression promoted fatty acid uptake and liver steatosis, whereas Sms2 deficiency had an opposite effect in comparison with their respective controls. Importantly, the exogenous ceramide supplementation to Huh7 cells, a human hepatoma cell line, reduced the expression of peroxisome proliferator-activated receptor gamma 2 and its target genes, Cd36 and Fsp27. Peroxisome proliferator-activated receptor gamma reporter analysis confirmed this phenomenon. Furthermore, peroxisome proliferator-activated receptor gamma antagonist treatment significantly decreased triglyceride accumulation in Sms2 liver-specific transgenic liver. Conclusions-We attributed these effects to ceramide that can suppress peroxisome proliferator-activated receptor gamma 2, thus reducing the expression of Cd36 and Fsp27 and reducing liver steatosis. After all, SMS2 inhibition in the liver could diminish liver steatosis.