FTY720 is a sphingosine 1‐phosphate receptor (S1PR) modulator used as a daily therapy to reduce disease activity in the relapsing form of multiple sclerosis (MS). FTY720 readily accesses the CNS. Previous studies have shown that phosphorylated FTY720 (FTY720‐p) enhances oligodendrocyte progenitor cell (OPC) survival, differentiation, and remyelination following experimentally induced demyelination in rodents. To elucidate the underlying mechanism, human fetal OPCs alone or in co‐culture with rat dorsal root ganglia neurons (DRGN) were treated daily with FTY720‐p, a condition that desensitizes cellular responses to S1P, the natural ligand of S1PR. In co‐cultures, FTY720‐p and S1P given daily or every three days increased the number of O1/MBP double positive cells and axonal ensheathment. In cultures composed of PDGFRα‐antibody selected cells alone, daily application of FTY720‐p also increased the number of O4/GC double positive cells. At an early time point (day 2), FTY720‐p activated ERK1/2, CREB and p38MAPK in O4‐positive cells, as well as in β‐III Tubulin positive neurons and GFAP positive astrocytes. In later cultures (day 6), FTY720‐p activated p38MAPK in O4 positive cells, p38MAPK and ERK1/2 in neurons, and p38MAPK, ERK1/2 and CREB in astrocytes. A MEK inhibitor (U0126) prevented the differentiation of OPCs into O4‐positive cells, while a p38MAPK inhibitor (PD169316) blocked progression into O4‐positive and into GC‐positive stages of differentiation. Our results demonstrate that FTY720‐p, under conditions that model daily clinical use, can act directly on OPCs to impact differentiation, and also indirectly via neurons and astrocytes by activating ERK1/2 and p38MAPK. GLIA 2014;62:1361–1375