Elevated TNF levels are associated with insulin resistance, but the molecular mechanisms linking cytokine signaling to impaired insulin function remain elusive. We previously demonstrated a role for Akt in insulin regulation of PKCII alternative splicing through phosphorylation of SRp40, a required mechanism for insulin-stimulated glucose uptake. We hypothesized that TNF attenuated insulin signaling by dephosphorylating Akt and its targets via ceramide-activated protein phosphatase (CAPP). Western blot analysis of L6 cell lysates demonstrated impaired insulin-stimulated phosphorylation of Akt, SRp40, and GSK3 in response to TNF and the short chain C6 ceramide analog. TNF increased serine/threonine phosphatase activity of PP1 in response to C6, but not insulin, suggesting a ceramide-specific effect. Myriocin, an inhibitor of de novo ceramide synthesis, blocked stimulation of the PP1 activity. Ceramide species measurement by LC-MS showed consistent increases in C24:1 and C16 ceramides. Effects of TNF and C6 on insulin-stimulated phosphorylation of GSK3 were prevented by myriocin and tautomycin, a PP1 inhibitor, further implicating a de novo ceramide-PP1 pathway. Alternative splicing assays demonstrated that TNF abolished insulin-mediated inclusion of the PKC_II exon. Collectively, our work demonstrates a role for PP1-like CAPP in mediating TNF effects blocking insulin phosphorylation cascades involved in glycogen metabolism and alternative splicing.