Sphingosine 1-phosphate (S1P), a lysophospholipid, has gained relevance to multiple sclerosis through the discovery of FTY720 (fingolimod), recently approved as an oral treatment for relapsing forms of multiple sclerosis. Its mechanism of action is thought to be immunological through an active phosphorylated metabolite, FTY720-P, that resembles S1P and alters lymphocyte trafficking through receptor subtype S1P₁. However, previously reported expression and in vitro studies of S1P receptors suggested that direct CNS effects of FTY720 might theoretically occur through receptor modulation on neurons and glia. To identify CNS cells functionally contributing to FTY720 activity, genetic approaches were combined with cellular and molecular analyses. These studies relied on the functional assessment, based on clinical score, of conditional null mouse mutants lacking S1P₁ in CNS cell lineages and challenged by experimental autoimmune encephalomyelitis (EAE), an animal model of multiple sclerosis. All conditional null mutants displayed WT lymphocyte trafficking that responded normally to FTY720. In marked contrast, EAE was attenuated and FTY720 efficacy was lost in CNS mutants lacking S1P₁ on GFAP-expressing astrocytes but not on neurons. In situ hybridization studies confirmed that astrocyte loss of S1P₁ was the key alteration in functionally affected mutants. Reductions in EAE clinical scores were paralleled by reductions in demyelination, axonal loss, and astrogliosis. Receptor rescue and pharmacological experiments supported the loss of S1P₁ on astrocytes through functional antagonism by FTY720-P as a primary FTY720 mechanism. These data identify nonimmunological CNS mechanisms of FTY720 efficacy and implicate S1P signaling pathways within the CNS as targets for multiple sclerosis therapies.