Acid sphingomyelinase (ASM) is the lysosomal enzyme responsible for the hydrolysis of sphingomyelin to ceramide and phosphocholine. An inherited deficiency of this enzymatic activity results in the Type A and B forms of Niemann-Pick disease (NPD). ASM is also readily secreted from cultured cells and can rapidly move from lysosomes to the cell surface upon stimulation by cytokines and other factors. Recent interest has focused on the role of this secreted/cell surface enzyme in ceramide-mediated signal transduction. We therefore sought to understand the mechanism(s) that might regulate intracellular targeting and secretion of this important hydrolase. Most lysosomal proteins are targeted to lysosomes in mammalian cells via the mannose 6-phosphate recognition system. Using cultured skin fibroblasts from I-cell disease patients, in which one of the enzymes responsible for mannose phosphorylation, GlcNAc-phosphotransferase, is deficient, we determined ASM activities in cell homogenates and media. The ratio of secreted to intracellular activity was approximately 8-fold greater in I-cell than in normal cells, indicating that mannose phosphorylation is important in the trafficking of this hydrolase. Most of the secreted activity required Zn+2 for full activity, supporting the concept that intracellular exposure of ASM to zinc within lysosomes is required for enzymatic activation. The recognition of lysosomal proteins by GlcNAc-phosphotransferase is mediated by protein structure, and a specific three-dimensional arrangement of lysine residues exposed on the surface of several enzymes has been shown to be critical for mannose phosphorylation. Alanine scanning mutagenesis of thirteen lysine residues in ASM demonstrated that 93lysine residue plays a critical role in ASM targeting since the K93A mutant had reduced intracellular activity, but enhanced secreted activity that was zinc responsive.