Fungal sphingolipids have inositol-phosphate head groups, which are essential for the viability of cells. These head groups are added by inositol phosphorylceramide (IPC) synthase, and AUR1 has been thought to encode this enzyme. Here, we show that an essential protein encoded by KEI1 is a novel subunit of IPC synthase of Saccharomyces cerevisiae. We find that Kei1 is localized in the medial-Golgi and that Kei1 is cleaved by Kex2, a late Golgi processing endopeptidase; therefore, it recycles between the medial- and late Golgi compartments. The growth defect of kei1-1, a temperature-sensitive mutant, is effectively suppressed by the overexpression of AUR1, and Aur1 and Kei1 proteins form a complex in vivo. The kei1-1 mutant is hypersensitive to aureobasidin A, a specific inhibitor of IPC synthesis, and the IPC synthase activity in the mutant membranes is thermolabile. A part of Aur1 is missorted to the vacuole in kei1-1 cells. We show that the amino acid substitution in kei1-1 causes release of Kei1 during immunoprecipitation of Aur1 and that Aur1 without Kei1 has hardly detectable IPC synthase activity. From these results, we conclude that Kei1 is essential for both the activity and the Golgi localization of IPC synthase.