<em>Sphingosine</em> <em>1</em>-<em>phosphate</em> is formed in cells in response to diverse stimuli, including growth factors, cytokines, G-protein-coupled receptor agonists, antigen, etc. Its production is catalysed by <em>sphingosine</em> kinase, while degradation is either via cleavage to produce palmitaldehyde and phosphoethanolamine or by dephosphorylation. In this review we discuss the most recent advances in our understanding of the role of the enzymes involved in metabolism of this lysolipid. <em>Sphingosine</em> <em>1</em>-<em>phosphate</em> can also bind to members of the endothelial differentiation gene (EDG) G-protein-coupled receptor family [namely EDG<em>1</em>, EDG3, EDG5 (also known as H2<em>1</em>8 or AGR<em>1</em>6), EDG6 and EDG8] to elicit biological responses. These receptors are coupled differentially via G(i), G(q), G(<em>1</em>2/<em>1</em>3) and Rho to multiple effector systems, including adenylate cyclase, phospholipases C and D, extracellular-signal-regulated kinase, c-Jun N-terminal kinase, p38 mitogen-activated protein kinase and non-receptor tyrosine kinases. These signalling pathways are linked to transcription factor activation, cytoskeletal proteins, adhesion molecule expression, caspase activities, etc. Therefore <em>sphingosine</em> <em>1</em>-<em>phosphate</em> can affect diverse biological responses, including mitogenesis, differentiation, migration and apoptosis, via receptor-dependent mechanisms. Additionally, <em>sphingosine</em> <em>1</em>-<em>phosphate</em> has been proposed to play an intracellular role, for example in Ca(2+) mobilization, activation of non-receptor tyrosine kinases, inhibition of caspases, etc. We review the evidence for both intracellular and extracellular actions, and extensively discuss future approaches that will ultimately resolve the question of dual action. Certainly, <em>sphingosine</em> <em>1</em>-<em>phosphate</em> will prove to be unique if it elicits both extra- and intra-cellular actions. Finally, we review the evidence that implicates <em>sphingosine</em> <em>1</em>-<em>phosphate</em> in pathophysiological disease states, such as cancer, angiogenesis and inflammation. Thus there is a need for the development of new therapeutic compounds, such as receptor antagonists. However, identification of the most suitable targets for drug intervention requires a full understanding of the signalling and action profile of this lysosphingolipid. This article describes where the research field is in relation to achieving this aim.