The Saccharomyces cerevisiae gene SYR2, necessary for growth inhibition by the cyclic lipodepsipeptide syringomycin E, is shown to be required for 4-hydroxylation of long chain bases in sphingolipid biosynthesis. Four lines of support for this conclusion are presented: (a) the predicted Syr2p shows sequence similarity to diiron-binding membrane enzymes involved in oxygen-dependent modifications of hydrocarbon substrates, (b) yeast strains carrying a disrupted SYR2 allele produced sphingoid long chain bases lacking the 4-hydroxyl group present in wild type strains, (c) 4-hydroxylase activity was increased in microsomes prepared from a SYR2 overexpression strain, and (d) the syringomycin E resistance phenotype of a syr2 mutant strain was suppressed when grown under conditions in which exogenous 4-hydroxysphingoid long chain bases were incorporated into sphingolipids. The syr2 strain produced wild type levels of sphingolipids, substantial levels of hydroxylated very long chain fatty acids, and the full complement of normal yeast sphingolipid head groups. These results show that the SYR2 gene is required for the 4-hydroxylation reaction of sphingolipid long chain bases, that this hydroxylation is not essential for growth, and that the 4-hydroxyl group of sphingolipids is necessary for syringomycin E action on yeast.