Melanoma differentiation associated gene-7/interleukin-24 (mda-7/IL-24) uniquely displays broad cancer-specific apoptosis-inducing activity through induction of endoplasmic reticulum (ER) stress. We hypothesize that ceramide, a promoter of apoptosis, might contribute to mda-7/IL-24 induction of apoptosis. Ad.mda-7-infected tumor cells, but not normal cells, showed increased ceramide accumulation. Infection with Ad.mda-7 induced a marked increase in various ceramides (C16, C24, C24:1) selectively in prostate cancer cells. Inhibiting the enzyme serine palmitoyltransferase (SPT) using the potent SPT inhibitor myriocin (ISP1), impaired mda-7/IL-24-induced apoptosis and ceramide production, suggesting that ceramide formation caused by Ad.mda-7 occurs through de novo synthesis of ceramide and that ceramide is required for mda-7/IL-24-induced cell death. Fumonisin B1 (FB1) elevated ceramide formation as well as apoptosis induced by Ad.mda-7, suggesting that ceramide formation may also occur through the salvage pathway. Additionally, Ad.mda-7 infection enhanced expression of acid sphingomyelinase (ASMase) with a concomitant increase in ASMase activity and decreased sphingomyelin in cancer cells. ASMase silencing by RNA interference inhibited the decreased cell viability and ceramide formation after Ad.mda-7 infection. Ad.mda-7 activated protein phosphatase 2A (PP2A) and promoted dephosphorylation of the anti-apoptotic molecule BCL-2, a downstream ceramide-mediated pathway of mda-7/IL-24 action. Pretreatment of cells with FB1 or ISP-1 abolished the induction of ER stress markers (BiP/GRP78, GADD153 and pospho-eIF2alpha) triggered by Ad.mda-7 infection indicating that ceramide mediates ER stress induction by Ad.mda-7. Additionally, recombinant MDA-7/IL-24 protein induced cancer-specific production of ceramide. These studies define ceramide as a key mediator of an ER stress pathway that may underlie mda-7/IL-24 induction of cancer-specific killing.