FTY720 is a novel immunomodulatory agent that inhibits lymphocyte trafficking and prevents allograft rejection. FTY720 is phosphorylated in vivo, and the phosphorylated drug acts as agonist for a family of G protein-coupled receptors that recognize sphingosine 1-phosphate. Evidence suggests that FTY720-phosphate-induced activation of S1P1 is responsible for its mechanism of action. FTY720 was rationally designed by modification of myriocin, a naturally occurring sphingoid base analog that causes immunosuppression by interrupting sphingolipid metabolism. In this study, we examined interactions between FTY720, FTY720-phosphate, and sphingosine-1-phosphate lyase, the enzyme responsible for irreversible sphingosine 1-phosphate degradation. FTY720-phosphate was stable in the presence of active sphingosine-1-phosphate lyase, demonstrating that the lyase does not contribute to FTY720 catabolism. Conversely, FTY720 inhibited sphingosine-1-phosphate lyase activity in vitro. Treatment of mice with FTY720 inhibited tissue sphingosine-1-phosphate lyase activity within 12 h, whereas lyase gene and protein expression were not significantly affected. Tissue sphingosine 1-phosphate levels remained stable or increased throughout treatment. These studies raise the possibility that disruption of sphingosine 1-phosphate metabolism may account for some effects of FTY720 on immune function and that sphingosine-1-phosphate lyase may be a potential target for immunomodulatory therapy.