Sphingosine kinase (SphK) is a conserved lipid kinase that catalyzes formation of important regulators of inter- and intracellular signaling, sphingosine-1 phosphate (S1P), and dihydrosphingosine 1-phosphate (dhS1P). In this study, we investigated the role of SphK1 in the regulation of expression of matrix metalloproteinase 1 (MMP1) in dermal fibroblasts, a key event in regulation of extra cellular matrix. We show that overexpression of SphK1 up-regulated MMP1 protein, MMP1 mRNA, and MMP1 promoter activity, and this action of SphK1 required activation of the ERK1/2-Ets1 and NF-kappaB pathways. Furthermore, experiments using SphK1 specific siRNA demonstrated that SphK1 is required for the TNF-alpha stimulation of MMP1. Additional data revealed a specific role of dhS1P, and not S1P, as a mediator of SphK1-dependent activation of ERK1/2 and up-regulation of MMP1. The stimulatory effect of dhS1P was sensitive to pertussis toxin, suggesting a possible involvement of a G-protein-coupled receptor. In contrast, S1P, but not dhS1P, stimulated the induction of COX-2, which demonstrated selective actions of these two closely related bioactive lipids. In conclusion, this study describes a novel mode of SphK1 signaling through generation of dhS1P with a key role in mediating transcriptional responses to TNF-alpha. This is the first report of selective function of dhS1P as compared with the better studied S1P.