SMPD3 catalyzes the hydrolysis of sphingomyelin to form ceramide and phosphocholine. Ceramide mediates numerous cellular functions, such as apoptosis and growth arrest, and is capable of regulating these 2 cellular events independently. Also hydrolyzes sphingosylphosphocholine. Regulates the cell cycle by acting as a growth suppressor in confluent cells. Probably acts as a regulator of postnatal development and participates in bone and dentin mineralization.