Our previous studies found that nerve growth factor (NGF), via ceramide, enhanced the number of action potentials (APs) evoked by a ramp of depolarizing current in capsaicin-sensitive sensory neurons. Ceramide can be metabolized by ceramidase to sphingosine (Sph), and Sph to sphingosine 1-phosphate (S1P) by sphingosine kinase. It is well established that each of these products of sphingomyelin metabolism can act as intracellular signalling molecules. This raises the question as to whether the enhanced excitability produced by NGF was mediated directly by ceramide or required additional metabolism to Sph and/or S1P. Sph applied externally did not affect the neuronal excitability, whereas internally perfused Sph augmented the number of APs evoked by the depolarizing ramp. Furthermore, internally perfused S1P enhanced the number of evoked APs. This sensitizing action of NGF, ceramide and internally perfused Sph was abolished by dimethylsphingosine (DMS), an inhibitor of sphingosine kinase. In contrast, internally perfused S1P enhanced the number of evoked APs in the presence of DMS. These observations support the idea that the metabolism of ceramide/Sph to S1P is critical for the sphingolipid-induced modulation of excitability. Both internally perfused Sph and S1P inhibited the outward K+ current by 25–35% for the step to +60 mV. The Sph- and S1P-sensitive currents had very similar current–voltage relations, suggesting that they were likely to be the same. In addition, the Sph-induced suppression of the K+ current was blocked by pretreatment with DMS. These findings demonstrate that intracellular S1P derived from ceramide acts as an internal second messenger to regulate membrane excitability; however, the effector system whereby S1P modulates excitability remains undetermined.