SignificanceThe mechanisms regulating remodeling of the plasma membrane required for HIV-1 assembly and budding are unknown. We found that the sphingomyelin hydrolase neutral sphingomyelinase-2 (nSMase2) interacts with HIV-1 Gag and regulates the hydrolysis of sphingomyelin to ceramide at plasma membrane HIV-1 assembly sites. Inhibition of nSMase2 results in the production of misshaped virions with increased sphingomyelin and reduced ceramide content that are not infectious. In HIV-1-infected humanized mice, inhibition of nSMase2 decreased plasma HIV-1, and if undetectable plasma HIV-1 was achieved, viral rebound did not occur. These results identify a host cell sphingomyelinase that is important for HIV-1 replication and is a druggable target for HIV-1.