Most of the conventional immunosuppressive drugs act by inhibiting the activation of enzymes, production of cytokines or proliferation of immune cells. Recently much attention is given to a new class of inhibitors that act by counteracting the functions of the lysophospholid sphingosine-1-phosphate (S1P). S1P is emerging as a potent stimulator of several immune cells and is critical for lymphocyte migration. The sphingosine analogue, FTY720 (fingolimod), a high affinity agonist of sphingosine-1-phosphate type-1 receptor (S1P-1), acts primarily by sequestering lymphocytes within peripheral lymphoid organs rendering them incapable of migrating to the sites of inflammation. Phase I, II and III, clinical trials comparing the efficacy of FTY720 containing regimens to conventional immunosuppressive regimens in de novo renal transplant patients, have been conducted. Moreover, clinical trials are also on-going in patients with relapsing-remitting multiple sclerosis showing obvious benefit for patients receiving FTY720. In this review, we focus on the transition of this novel compound from bench to clinical trials, and discuss the clinical potential of this drug in autoimmune diseases and in transplantation immunology.