The regulators affecting skeletal tissue formation and its maintenance include a wide array of molecules with very diverse functions. More recently, sphingolipids have been added to this growing list of regulatory molecules in the skeletal tissues. Sphingolipids are integral parts of various lipid membranes present in the cells and organelles. For a long time, these macromolecules were considered as inert structural elements. This view, however, has radically changed in recent years as sphingolipids are now recognized as important second messengers for signal-transduction pathways that affect cell growth, differentiation, stress responses and programmed death. In the current review, we discuss the available data showing the roles of various sphingolipids in three different skeletal cell types—chondrocytes in cartilage and osteoblasts and osteoclasts in bone. We provide an overview of the biology of sphingomyelin phosphodiesterase 3 (SMPD3), an important regulator of sphingolipid metabolism in the skeleton. SMPD3 is localized in the plasma membrane and has been shown to cleave sphingomyelin to generate ceramide, a bioactive lipid second messenger, and phosphocholine, an essential nutrient. SMPD3 deficiency in mice impairs the mineralization in both cartilage and bone extracellular matrices leading to severe skeletal deformities. A detailed understanding of SMPD3 function may provide a novel insight on the role of sphingolipids in the skeletal tissues.