Insulin resistance is a complex metabolic disorder in which insulin-sensitive tissues fail to respond to the physiological action of insulin. There is a strong correlation of insulin resistance and the development of type 2 diabetes both reaching epidemic proportions. Dysfunctional lipid metabolism is a hallmark of insulin resistance and a risk factor for several cardiovascular and metabolic disorders. Numerous studies in humans and rodents have shown that insulin resistance is associated with elevations of non-esterified fatty acids (NEFA) in the plasma. Moreover, bioactive lipid intermediates such as diacylglycerol (DAG) and ceramides appear to accumulate in response to NEFA, which may interact with insulin signaling. However, recent work has also indicated that sphingosine 1-phosphate (S1P), a breakdown product of ceramide, modulate insulin signaling in different cell types. In this review, we summarize the current state of knowledge about S1P and insulin signaling in insulin sensitive cells. A specific focus is put on the action of S1P on hepatocytes, pancreatic β-cells and skeletal muscle cells. In particular, modulation of S1P-signaling can be considered as a potential therapeutic target for the treatment of insulin resistance and type 2 diabetes.