Sphingosine and sphingosine-1-phosphate (SPP) are interconvertible sphingolipid metabolites with opposing effects on cell growth and apoptosis. Based on sequence homology with LBP1, a lipid phosphohydrolase that regulates the levels of phosphorylated sphingoid bases in yeast, we report here the cloning, identification, and characterization of a mammalian SPP phosphatase (mSPP1). This hydrophobic enzyme, which contains the type 2 lipid phosphohydrolase conserved sequence motif, shows substrate specificity for SPP. Partially purified Myc-tagged mSPP1 was also highly active at dephosphorylating SPP. When expressed in yeast, mSPP1 can partially substitute for the function of LBP1. Membrane fractions from human embryonic kidney HEK293 cells transfected with mSPP1 markedly degraded SPP but not lysophosphatidic acid, phosphatidic acid, or ceramide-1-phosphate. Enforced expression of mSPP1 in NIH 3T3 fibroblasts not only decreased SPP and enhanced ceramide levels, it also markedly diminished survival and induced the characteristic traits of apoptosis. Collectively, our results suggest that SPP phosphohydrolase may regulate the dynamic balance between sphingolipid metabolite levels in mammalian cells and consequently influence cell fate.