The initiation of intracellular signaling events through the 55 kDa tumor necrosis factor-receptor (TNF-R55) appears to depend on protein intermediates that interact with specific cytoplasmic domains of TNF-R55. By combined use of the yeast interaction trap system and a peptide scanning library, the novel WD-repeat protein FAN has been identified, which specifically binds to a cytoplasmic nine amino acid binding motif of TNF-R55. This region has been previously recognized as a distinct functional domain that is both required and sufficient for the activation of neutral sphingomyelinase (N-SMase). Overexpression of full-length FAN enhanced N-SMase activity in TNF-treated cells, while truncated mutants of FAN produced dominant negative effects. The data suggest that FAN regulates ceramide production by N-SMase, which is a crucial step in TNF signaling.