Sphingosine-1-phosphate (S1P) and lysophosphatidic acid (LPA) are endogenous bioactive lipids that participate in the regulation of mammalian cell proliferation, apoptosis, migration, and angiogenesis. These processes are each critical for successful embryogenesis, raising the possibility that lysophospholipid signaling may contribute to normal animal development. In fact, recent studies in developmental model systems have established that S1P and LPA are necessary for diverse developmental programs including those required for morphogenesis of vertebrate reproductive, cardiovascular and central and peripheral nervous systems (PNS), as well as the establishment of maternal-fetal circulation and the immune system. Genetic, morphological, and biochemical characterization of developmental model systems offer powerful approaches to elucidating the molecular mechanisms of lysophospholipid signaling and its contributions to animal development and postnatal physiology. In this review, the routes of S1P and LPA metabolism and our current understanding of lysophospholipid-mediated signal transduction in mammalian cells will be summarized. The evidence implicating lysophospholipid signaling in the development of specific vertebrate systems will then be reviewed, with an emphasis on signals mediated through G protein-coupled receptors of the Edg family. Lastly, recent insights derived from the study of simple metazoan models and implications regarding lysophospholipid signaling in organisms in which Edg receptors are not conserved will be explored.