The lipid mediator sphingosine 1-phosphate (S1P) regulates several cellular processes through binding to its receptors (S1P(1)-S1P(5)), which are heterotrimeric G protein-coupled receptors. Here, we report that all S1P receptors are palmitoylated. In S1P(1), three Cys residues in the cytoplasmic tail are palmitoylated. We examined the roles of palmitoylation of S1P(1) using model cells in which wild-type S1P(1) or a non-palmitoylated mutant S1P(1) was overproduced. Compared with wild-type S1P(1), the non-palmitoylated S1P(1) exhibited binding affinity similar to the natural ligand S1P but lower to the synthetic ligand FTY720 phosphate (FTY720-P), the active form of the immunomodulator FTY720. However, downstream signaling of non-palmitoylated S1P(1) was similarly affected by S1P and FTY720-P stimulation. Moreover, upon stimulation with S1P, internalization of the mutant non-palmitoylated S1P(1) was retarded, compared with that of the wild-type protein. This effect was much more pronounced with FTY720-P stimulation. Similar differences were observed for the phosphorylation of S1P(1) and its mutant. These findings may provide insights into the molecular mechanisms of the pharmacological effects of FTY720. Finally, palmitoylation of wild-type S1P(1) increased upon treatment with S1P, suggesting that S1P(1) undergoes a palmitoylation/depalmitoylation cycle after stimulation by its ligands.