Sphingolipids have long been viewed as rather passive structural components of cellular membranes. More recently, it has become evident that metabolism of sphingomyelin yields several lipid mediators that evoke diverse and specific responses in different cell types. One sphingomyelin derivate, sphingosine-1-phosphate (S1P), has attracted particular attention for its effect on epidermal cells, which differs from those on most other cell types. S1P inhibits keratinocyte proliferation and induces keratinocyte differentiation and migration, suggesting a role for S1P in the re-epithelialization of wounds. The migratory response involves the phosphorylation and activation of Smad3. In epithelial tumors, S1P signaling has been linked with potential oncogenic effects, but has also been found to inhibit metastasis in a mouse melanoma model. S1P promotes endothelial cell survival, acts as a chemoattractant for vascular cells, and exerts a protective effect on the endothelial barrier. Conversely, S1P receptor knockout leads to embryonic lethality mainly due to impaired vascular maturation. S1P presumably modulates peripheral T-lymphocyte levels by stimulating their egress from lymphoid organs rather than by promoting T-cell proliferation. The S1P analog FTY720 (fingolimod) acts as a functional antagonist by inhibiting lymphocyte egress, and thus holds great promise as an immunosuppressant drug for the prevention of allograft rejection and treatment of T-lymphocyte-driven inflammatory skin diseases, such as lupus erythematosus, psoriasis, and atopic dermatitis. Topical use of S1P and other sphingosine compounds is also under investigation, particularly for the treatment of acne vulgaris.