Neutral ceramidase plays a crucial role in regulating the tumor microenvironment (TME) and breast cancer progression. Deletion of neutral ceramidase in multiple breast cancer models in female mice accelerates tumor growth by promoting the exhaustion of cytotoxic CD8+ T cells and the generation of immune-suppressive TREM2+ tumor-associated macrophages (TAMs). Mechanistically, neutral ceramidase is essential for lipid droplet formation and lipolysis, which generate fatty acids for fatty-acid oxidation (FAO) and orchestrate macrophage metabolism. Ceramide accumulation leads to the upregulation of TREM2 on TAMs, which promotes CD8+ T cell exhaustion. In vivo and in vitro studies show that neutral ceramidase deficiency induces the exhaustion of Ly6C+CD39+CD8+ T cells, leading to increased tumor growth and poor clinical outcomes. This study highlights the importance of neutral ceramidase in regulating the TME and provides a potential therapeutic target for breast cancer treatment.Neutral ceramidase plays a crucial role in regulating the tumor microenvironment (TME) and breast cancer progression. Deletion of neutral ceramidase in multiple breast cancer models in female mice accelerates tumor growth by promoting the exhaustion of cytotoxic CD8+ T cells and the generation of immune-suppressive TREM2+ tumor-associated macrophages (TAMs). Mechanistically, neutral ceramidase is essential for lipid droplet formation and lipolysis, which generate fatty acids for fatty-acid oxidation (FAO) and orchestrate macrophage metabolism. Ceramide accumulation leads to the upregulation of TREM2 on TAMs, which promotes CD8+ T cell exhaustion. In vivo and in vitro studies show that neutral ceramidase deficiency induces the exhaustion of Ly6C+CD39+CD8+ T cells, leading to increased tumor growth and poor clinical outcomes. This study highlights the importance of neutral ceramidase in regulating the TME and provides a potential therapeutic target for breast cancer treatment.