The ceramide synthesis pathway is essential to human biology and health but genetic influences remain unexplored. The core function of this pathway is the generation of biologically active ceramide from its precursor, dihydroceramide. Dihydroceramides have diverse, often protective, biological roles; conversely, increased ceramide levels are biomarkers of complex disease. To explore the genetics of the ceramide synthesis pathway, we searched for deleterious nonsynonymous variants in the genomes of 1,020 Mexican Americans from extended pedigrees. We identified a Hispanic ancestry-specific rare functional variant, L175Q, in DEGS1, a key enzyme in the pathway that converts dihydroceramide to ceramide. This amino acid change was significantly associated with large increases in plasma dihydroceramides. Indexes of DEGS1 enzymatic activity were dramatically reduced in heterozygotes. CRISPR/Cas9 genome editing of HepG2 cells confirmed that the L175Q variant results in a partial loss of function for the DEGS1 enzyme. Further, we show that increases in dihydroceramides and decreases in DEGS1 activity are associated with the future development of type 2 diabetes in our cohort. Understanding the biological role of variants, such as L175Q, in ceramide synthesis may improve the understanding of metabolic-related disorders, and spur ongoing research of drug targets along this pathway.de novo