Sphingomyelin (SM) synthase 1 (SMS1), which is involved in lipodystrophy, deafness, and thrombasthenia, generates diacylglycerol (DG) and SM using phosphatidylcholine (PC) and ceramide as substrates. Here, we found that SMS1 possesses DG‐generating activities via hydrolysis of PC and phosphatidylethanolamine (PE) in the absence of ceramide and ceramide phosphoethanolamine synthase (CPES) activity. In the presence of the same concentration (4.7 mol%) of PC and ceramide, the amounts of DG produced by SMS and PC‐phospholipase C (PLC) activities of SMS1 were approximately 65% and 35% of total DG production, respectively. PC‐PLC activity showed substrate selectivity for saturated and/or monounsaturated fatty acid‐containing PC species. A PC‐PLC/SMS inhibitor, D609, inhibited only SMS activity. Mn2+ inhibited only PC‐PLC activity. Intriguingly, DG attenuated SMS/CPES activities. Our study indicates that SMS1 is a unique enzyme with PC‐PLC/PE‐PLC/SMS/CPES activities.