Palmitate (PA) impairs endothelial progenitor cells (EPCs). However, the molecular mechanism underlying the suppressive function of PA remains largely unknown. Ceramide, a free fatty acid metabolite, mediates multiple cellular signals. We hypothesized that ceramide acts as an intermediate molecule to mediate inhibition of EPCs by PA. We first demonstrated that PA could inhibit the attachment, migration, and tube formation of EPCs through suppression of the Akt/endothelial nitric oxide (NO) synthase (eNOS) signaling pathway. In addition, we observed that PA could induce ceramide accumulation in EPCs. To test whether the accumulation of ceramide causes EPC dysfunction, the ceramide synthesis inhibitors myriocin and fumonisin B1 were used. We that found both inhibitors could effectively abolish PA-mediated EPC inhibition. Furthermore, the ceramide deacylation inhibitor N-oleoylethanolamine could augment the inhibitory effect of PA on EPCs, indicating that it is ceramide, not its metabolites, that mediates the suppression of EPCs by PA. We have previously shown that Akt/eNOS phosphorylation was reduced after PA treatment, which, in turn, hampered the normal bioavailability of NO, leading to impaired functions of EPCs. To test the role for ceramide in this process, a clinically used NO donor, sodium nitroprusside, was used. We found that sodium nitroprusside could rescue the suppressive effects of ceramide on EPCs, suggesting that ceramide-mediated EPC inhibition might be through reduction of NO production. Taken together, our findings indicated that ceramide-induced reduction of NO might be the molecular mechanism for PA-mediated EPC inhibition; thus, targeting either ceramide or NO production might be an effective means for improvement of EPC functions in diseases.