Sphingomyelin synthase (SMS) catalyzes the synthesis of sphingomyelin (SM) and is required for maintenance of plasma membrane microdomain fluidity. Of the two isoforms of mammalian SMS, SMS1 is mostly present in the trans-Golgi apparatus, whereas SMS2 is predominantly found at the plasma membrane. SMS2 has a role in receptor mediated response to inflammation in macrophages, however, the role of SMS2 in vascular permeability, pulmonary edema, and lung injury have not been investigated. To define the role of SMS activation in lung injury, we utilized a lipopolysaccharide (LPS)-induced lung edema model. SMS activity was measured and correlated with the severity of lung injury. Within 4 h of LPS treatment, SMS activity was increased significantly and remained upregulated up to 24 h. Comparison of LPS-induced lung injury in SMS2 knockout (SMS2(-/-)) and wild-type littermate control mice showed that inflammation, cytokine induction, and lung injury were significantly inhibited in SMS2(-/-) mice. Our results suggest that a deficiency of SMS2 can diminish the extent of pulmonary edema and lung injury. Furthermore, we show that depletion of SMS2 was sufficient to decrease MAP kinase-JNK activation, severity of LPS-induced pulmonary neutrophil influx, and inflammation, suggesting a novel role of SMS2 activation in lung injury.