Protein kinase C (PKC), a calcium and phospholipid dependent protein kinase C, has emerged as a key element in signal transduction and cell regulation. It is activated by sn-1,2-diacylglycerol (DAG) second messengers and it serves as the receptor for phorbol esters, potent tumor promoters. PKC is now known to occur as a family of isoenzymes sharing similar structural features that allow regulation of activity by calcium, phospholipid, and DAG. In vitro mechanisms of PKC regulation by phospholipid, DAG, and phorbol esters have been studied using mixed micelles of Triton X-100/lipids. PKC activation occurs at physiologic mole fractions of phospholipid and DAG, does not require a bilayer, and appears to occur by a two-step mechanism whereby PKC initially interacts with a phospholipid surface and is then activated by the addition of DAG. Similar methodology has been used to explore the inhibition of PKC by different inhibitors that interact with its regulatory domain. Sphingosine and lysosphingolipids are potent inhibitors of PKC that prevent its interaction with DAG/phorbol esters. These naturally occurring metabolites have been shown to affect PKC activity in different cell systems. Disturbances in sphingolipid metabolism may lead to accumulation of lysosphingolipids with consequent inhibition of PKC. Additionally, these naturally occurring metabolites may have physiologic functions in regulating PKC activity by counteracting the action of DAG. The mechanism of action of sphingosine/lysosphingolipids and their possible physiologic function will be discussed.