ISP-1 (myriocin) is a potent inhibitor of serine palmitoyltransferase, the primary enzyme of sphingolipid biosynthesis, and is a useful tool for studying the biological functions of sphingolipids in both mammals and yeast (Saccharomyces cerevisiae). In a previous study, we cloned yeast multicopy suppressor genes for ISP-1, and one of these, YPK1/SLI2, was shown to encode a serine/threonine kinase which is a yeast homologue of mammalian SGK1 (serum/glucocorticoid-regulated kinase 1). In the present study, another gene, termed SLI1 (YGR212W; GenBank accession number CAA97239.1), was characterized. Sli1p has weak similarity to Atf1p and Atf2p, which are alcohol acetyltransferases. Although a sli1-null strain grew normally, the IC50 of ISP-1 for the growth of this strain was markedly decreased compared with that for the parental strain, indicating that Sli1p is a major contributor to ISP-1 resistance in yeast. On a sli1-null background, the increase in resistance to ISP-1 induced by YPK1 gene transfection was almost abolished. These data indicate that Sli1p co-operates with Ypk1p in mediating resistance to ISP-1 in yeast. Sli1p was found to convert ISP-1 into N-acetyl-ISP-1 in vitro. Furthermore, N-acetyl-ISP-1 did not share the ability of ISP-1 to inhibit the growth of yeast cells, and the serine palmitoyltransferase inhibitory activity of N-acetyl-ISP-1 was much lower than that of ISP-1. These data suggest that Sli1p inactivates ISP-1 due to its N-acetyltransferase activity towards ISP-1.