Ceramide plays a crucial role as a basic building block of sphingolipids, but also as a signalling molecule mediating cell-fate decisions. Three genes, LAG1, LAC1 and LIP1, have been shown to be required for ceramide synthase activity in Saccharomyces cerevisiae [Guillas, Kirchman, Chuard, Pfefferli, Jiang, Jazwinski and Conzelman (2001) EMBO J. 20, 2655–2665; Schorling, Vallee, Barz, Reizman and Oesterhelt (2001) Mol. Biol. Cell 12, 3417–3427; Vallee and Riezman (2005) EMBO J. 24, 730–741]. In the present study, the topology of the Lag1p and Lac1p subunits was investigated. The N- and C-termini of the proteins are in the cytoplasm and eight putative membrane-spanning domains were identified in Lag1p and Lac1p by insertion of glycosylation and factor Xa cleavage sites at various positions. The conserved Lag motif, potentially containing the active site, is most likely embedded in the membrane. We also present evidence that histidine and aspartic acid residues in the Lag motif are essential for the function of Lag1p in vivo.