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Biallelic loss-of-function variants in SMPD4 cause a rare and severe neurodevelopmental disorder with progressive congenital microcephaly and early death. SMPD4 encodes a sphingomyelinase that hydrolyses sphingomyelin into ceramide at neutral pH and can thereby affect membrane lipid homeostasis. SMPD4 localizes to the membranes of the endoplasmic reticulum and nuclear envelope and interacts with nuclear pore complexes (NPC). We refine the clinical phenotype of loss-of-function SMPD4 variants by describing five individuals from three unrelated families with longitudinal data due to prolonged survival. All individuals surviving beyond infancy developed insulin-dependent diabetes, besides presenting with a severe neurodevelopmental disorder and microcephaly, making diabetes one of the most frequent age-dependent non-cerebral abnormalities. We studied the function of SMPD4 at the cellular and organ levels. Knock-down of SMPD4 in human neural stem cells causes reduced proliferation rates and prolonged mitosis. Moreover, SMPD4 depletion results in abnormal nuclear envelope breakdown and reassembly during mitosis and decreased post-mitotic NPC insertion. Fibroblasts from affected individuals show deficient SMPD4-specific neutral sphingomyelinase activity, without changing (sub)cellular lipidome fractions, which suggests a local function of SMPD4 on the nuclear envelope. In embryonic mouse brain, knockdown of Smpd4 impairs cortical progenitor proliferation and induces premature differentiation by altering the balance between neurogenic and proliferative progenitor cell divisions. We hypothesize that, in individuals with SMPD4-related disease, nuclear envelope bending, which is needed to insert NPCs in the nuclear envelope, is impaired in the absence of SMPD4 and interferes with cerebral corticogenesis and survival of pancreatic beta cells.