Sphingosine-1-phosphate (S1P) is a bioactive sphingolipid metabolite involved in many critical cell processes. It is produced by the phosphorylation of sphingosine by sphingosine kinases (SphKs) and exported out of cells via transporters such as spinster homolog 2 (Spns2). S1P regulates diverse physiological processes by binding to specific G protein-binding receptors, S1P receptors (S1PRs) 1–5, through a process coined as “inside-out signaling.” The S1P concentration gradient between various tissues promotes S1PR1-dependent migration of T cells from secondary lymphoid organs into the lymphatic and blood circulation. S1P suppresses T cell egress from and promotes retention in inflamed peripheral tissues. S1PR1 in T and B cells as well as Spns2 in endothelial cells contributes to lymphocyte trafficking. FTY720 (Fingolimod) is a functional antagonist of S1PRs that induces systemic lymphopenia by suppression of lymphocyte egress from lymphoid organs. In this review, we summarize previous findings and new discoveries about the importance of S1P and S1PR signaling in the recruitment of immune cells and lymphocyte retention in inflamed tissues. We also discuss the role of S1P-S1PR1 axis in inflammatory diseases and wound healing.