Lysosomal ceramidase that hydrolyzes sphingolipid ceramides into sphingosine and free fatty acids at acidic pH. Ceramides, sphingosine, and its phosphorylated form sphingosine-1-phosphate are bioactive lipids that mediate cellular signaling pathways regulating several biological processes including cell proliferation, apoptosis and differentiation. Has a higher catalytic efficiency towards C12-ceramides versus other ceramides. Also catalyzes the reverse reaction allowing the synthesis of ceramides from fatty acids and sphingosine. For the reverse synthetic reaction, the natural sphingosine D-erythro isomer is more efficiently utilized as a substrate compared to D-erythro-dihydrosphingosine and D-erythro-phytosphingosine, while the fatty acids with chain lengths of 12 or 14 carbons are the most efficiently used. Has also an N-acylethanolamine hydrolase activity. By regulating the levels of ceramides, sphingosine and sphingosine-1-phosphate in the epidermis, mediates the calcium-induced differentiation of epidermal keratinocytes. Also indirectly regulates tumor necrosis factor/TNF-induced apoptosis. By regulating the intracellular balance between ceramides and sphingosine, in adrenocortical cells, probably also acts as a regulator of steroidogenesis.; [Isoform 2]: May directly regulate steroidogenesis by binding the nuclear receptor NR5A1 and negatively regulating its transcriptional activity.