ACER1 hydrolyzes the sphingolipid ceramide into sphingosine and free fatty acid at an optimal pH of 8.0. It has a highly restricted substrate specificity for the natural stereoisomer of ceramide with D-erythro-sphingosine but not D-ribo-phytosphingosine or D-erythro-dihydrosphingosine as a backbone. It may have a role in regulating the levels of bioactive lipids ceramide and sphingosine 1-phosphate, as well as complex sphingolipids.