We have previously demonstrated that hexanoyl-D-erythro-sphingosine (C(6)-ceramide), an anti-mitogenic cell-permeable lipid metabolite, limited vascular smooth muscle growth by abrogating trauma-induced Akt activity in a stretch injury model of neointimal hyperplasia. Furthermore, ceramide selectively and directly activated protein kinase C zeta (PKC zeta) to suppress Akt-dependent mitogenesis. To further analyze the interaction between ceramide and PKC zeta, the ability of ceramide to localize within highly structured lipid microdomains (rafts) and activate PKC zeta was investigated. Using rat aorta vascular smooth muscle cells (A7r5), we now demonstrate that C(6)-ceramide treatment results in an increased localization and phosphorylation of PKC zeta within caveolin-enriched lipid microdomians to inactivate Akt. In addition, ceramide specifically reduced the association of PKC zeta with 14-3-3, a scaffold protein localized to less structured regions within membranes. Pharmacological disruption of highly structured lipid microdomains resulted in abrogation of ceramide-activated, PKC zeta-dependent Akt inactivation, whereas molecular strategies suggest that ceramide-dependent PKC zeta phosphorylation of Akt3 at Ser(34) was necessary for ceramide-induced vascular smooth muscle cell growth arrest. Taken together, these data demonstrate that structured membrane microdomains are necessary for ceramide-induced activation of PKC zeta and resultant diminished Akt activity, leading to vascular smooth muscle cell growth arrest.