Neutral sphingomyelinase (nSMase), the initial enzyme of the sphingolipid signaling pathway, is thought to play a key role in cellular responses to tumor necrosis factor alpha (TNF-alpha), such as inflammation, proliferation, and apoptosis. The mechanism of TNF-alpha-induced nSMase activation is only partly understood. Using biochemical, molecular, and pharmacological approaches, we found that nSMase activation triggered by TNF-alpha is required for TNF-alpha-induced proliferation and in turn requires a proteolytic cascade involving furin, membrane type 1 matrix metalloproteinase (MT1-MMP), and MMP2, and leading finally to extracellular signal-regulated kinase 1/2 (ERK1/2) phosphorylation and DNA synthesis, in smooth muscle cells (SMC) and fibroblasts. Pharmacological and molecular inhibitors of MMPs (batimastat), furin (alpha1-PDX inhibitor-transfected SMC), MT1-MMP (SMC overexpressing a catalytically inactive MT1-MMP), MMP2 (fibroblasts from MMP2(-/-) mice), and small interfering RNA (siRNA) strategies (siRNAs targeting furin, MT1-MMP, MMP2, and nSMase) resulted in near-complete inhibition of the activation of nSMase, sphingosine kinase-1, and ERK1/2 and of subsequent DNA synthesis. Exogenous MT1-MMP activated nSMase and SMC proliferation in normal but not in MMP2(-/-) fibroblasts, whereas exogenous MMP2 was active on both normal and MMP2(-/-) fibroblasts. Altogether these findings highlight a pivotal role for furin, MT1-MMP, and MMP2 in TNF-alpha-induced sphingolipid signaling, and they identify this system as a possible target to inhibit SMC proliferation in vascular diseases.