In a previous study, we reported that the Saccharomyces cerevisiae gene YPC1 encodes an alkaline ceramidase with a dual activity, catalyzing both hydrolysis and synthesis of yeast ceramide (Mao, C., Xu, R., Bielawska, A., and Obeid, L. M. (2000) J. Biol. Chem. 275, 6876-6884). In this study, we have identified a YPC1 homologue in S. cerevisiae that also encodes an alkaline ceramidase. We show that these two ceramidases have different substrate specificity, such that YPC1p preferentially hydrolyzes phytoceramide, whereas the new ceramidase YDC1p hydrolyzes dihydroceramide preferentially and phytoceramide only slightly. Neither enzyme hydrolyzes unsaturated mammalian-type ceramide. In contrast to YPC1p, YDC1p had only minor in vitro reverse activity of catalyzing dihydroceramide formation from a free fatty acid and dihydrosphingosine and no activity with phytosphingosine. Overexpression of YDC1p had no reverse activity in non-stressed yeast cells, but like YPC1p suppressed the inhibition of growth by fumonisin B1 albeit more modestly. Deletion of YDC1 and YPC1 or both did not apparently affect growth, suggesting neither gene is essential. However, the Deltaydc1 deletion mutant but not the Deltaypc1 deletion mutant was sensitive to heat stress, indicating a role for dihydroceramide but not phytoceramide in heat stress responses, and suggesting that the two enzymes have distinct physiological functions.