Sphingosine 1-phosphate (S1P) is a bioactive lipid that is produced by the sphingosine kinase-catalysed phosphorylation of sphingosine. S1P is an important regulator of cell function, mediating many of its effects through a family of five closely related G protein-coupled receptors (GPCR) termed S1P(1-5) which exhibit high affinity for S1P. These receptors function to relay the effects of extracellular S1P via well-defined signal transduction networks linked to the regulation of cell proliferation, survival, migration etc. Diverse agonists (e.g. cytokines) also activate sphingosine kinase and the resulting S1P formed may bind to specific undefined intracellular targets to elicit cellular responses. The purpose of this review is to discuss some of the spatial/temporal aspects of intracellular S1P signalling and to define the function of sphingosine kinases and lipid phosphate phosphatases (which catalyse dephosphorylation of S1P) in terms of their regulation of cell function. Finally, we survey the function of S1P in relation to disease, where the major challenge is to dissect the role of intracellular versus extracellular actions of S1P in terms of association with defined diseased phenotypes.