The role of dihydroceramide desaturase as a key enzyme in the de-novo pathway of ceramide generation was investigated in human neuroblastoma cells (SMS-KCNR). A novel assay using water soluble analogs of dihydroceramide, dihydroceramidoids (D-e-dhCCPS analogs) was used to measure desaturase activity in-situ. Conversion of D-e-C12-dhCCPS (C12-dhCCPS) to its 4,5-desaturated counterpart: D-e-C12-CCPS (C12-CCPS) was determined by LC/MS analysis. The validity of the assay was confirmed by C8-cyclopropenylceramide, a competitive inhibitor of dihydroceramide desaturase. A human homologue (DEGS-1) of the Drosophila melanogaster degenerative-spermatocyte-gene-1 (des-1) was recently identified, and reported to have desaturase activity. Transfection of SMS-KCNR cells with siRNA to DEGS-1 significantly blocked the conversion of C12-dhCCPS to C12-CCPS. The associated accumulation of endogenous dihydroceramides confirmed DEGS-1 as the main active dihydroceramide desaturase in these cells. The partial loss of DEGS-1 inhibited cell growth with cell cycle arrest at G0/G1. This was accompanied by significant decrease in the amount of phosphorylated retinoblastoma protein (pRb). This hypophosphorylation was inhibited by tautomycin and not by okadaic acid, suggesting the involvement of protein phosphatase 1. Additionally, we found that treatment of SMS-KCNR cells with fenretinide inhibited desaturase activity in a dose dependent manner. Increase of dihydroceramides, but not ceramides, paralled this process as measured by LC/MS. There were no effects on the mRNA or protein levels of DEGS-1, suggesting that fenretinide acts at the post-translational level as an inhibitor of this enzyme. Tautomycin was also able to block the hypophosphorylation of Rb observed with fenretinide treatment. These findings suggest a novel biologic function for dihydroceramides.