The introduction of the double bond in the sphingoid backbone of sphingolipids occurs at the level of dihydroceramide via an NADPH-dependent desaturase, as discovered in permeabilized rat hepatocytes. In the rat, the enzyme activity, which has now been further characterized, appeared to be mostly enriched in liver and Harderian gland. By means of subcellular fractionation of rat liver homogenates and density gradient separation of microsomal fractions, the desaturase was localized to the endoplasmic reticulum. Various detergents were inhibitory to the enzyme, and maximal activities were obtained in the presence of NADPH and when the substrate was complexed to albumin. In the presence of albumin, the chain length of the fatty acid of the truncated dihydroceramides hardly affected the activity. Finally, in view of a likely evolutionary relationship between desaturases and hydroxylases, the formation of hydroxylated intermediates was analyzed. No evidence for their presence was found under our assay conditions.