Naive CD4(+) T cells differentiate into diverse effector and regulatory lineages to orchestrate immunity and tolerance. Here we found that the differentiation of proinflammatory T helper type 1 (T(H)1) cells and anti-inflammatory Foxp3(+) regulatory T cells (T(reg) cells) was reciprocally regulated by S1P(1), a receptor for the bioactive lipid sphingosine 1-phosphate (S1P). S1P(1) inhibited the generation of extrathymic and natural T(reg) cells while driving T(H)1 development in a reciprocal manner and disrupted immune homeostasis. S1P(1) signaled through the kinase mTOR and antagonized the function of transforming growth factor-β mainly by attenuating sustained activity of the signal transducer Smad3. S1P(1) function was dependent on endogenous sphingosine kinase activity. Notably, two seemingly unrelated immunosuppressants, FTY720 and rapamycin, targeted the same S1P(1) and mTOR pathway to regulate the dichotomy between T(H)1 cells and T(reg) cells. Our studies establish an S1P(1)-mTOR axis that controls T cell lineage specification.