Sphingomyelin (SM) in combination with cholesterol forms specialized membrane lipid microdomains in which specific receptors and signaling molecules are localized or recruited to mediate intracellular signaling. SM-microdomain levels in mouse thymus were low in the early CD4+CD8+ double-positive (DP) stage prior to thymic selection and increased >10-fold during late selection. T-cell receptor (TCR) signal strength is a key factor determining whether DP thymocytes undergo positive or negative selection. We examined the role of SM-microdomains in thymocyte development and related TCR signaling, using SM synthase 1 (SMS1)-deficient (SMS1-/-) mice which display low SM expression in all thymocyte populations. SMS1 deficiency caused reduced cell numbers after late DP stages in TCR transgenic models. TCR-dependent apoptosis induced by anti-CD3 treatment was enhanced in SMS1-/- DP thymocytes both in vivo and in vitro. SMS1-/- DP thymocytes, relative to controls, showed increased phosphorylation of TCR-proximal kinase ZAP-70 and increased expression of Bim and Nur77 proteins involved in negative selection following TCR stimulation. Addition of SM to cultured normal DP thymocytes led to greatly increased surface expression of SM-microdomains, with associated reduction of TCR signaling and TCR-induced apoptosis. Our findings indicate that SM-microdomains are increased in late DP stages, function as negative regulators of TCR signaling and modulate the efficiency of TCR-proximal signaling to promote thymic selection events leading to subsequent developmental stages.