FTY720 (fingolimod) is a first‐in‐class sphingosine 1‐phosphate (S1P) receptor modulator that was highly effective in Phase II clinical trials for Multiple Sclerosis (MS). FTY720 is phosphorylated in vivo by sphingosine kinase‐2 to form the active moiety FTY720‐phosphate that binds to four of the five G protein‐coupled S1P receptor subtypes. Studies using conditional S1P1 receptor‐deficient and sphingosine kinase‐deficient mice showed that the egress of lymphocytes from lymph nodes requires signalling of lymphocytic S1P1 receptors by the endogenous ligand S1P. The S1P mimetic FTY720‐phosphate causes internalization and degradation of cell membrane‐expressed S1P1, thereby antagonizing S1P action at the receptor. In models of human MS and demyelinating polyneuropathies, functional antagonism of lymphocytic S1P1 slows S1P‐driven egress of lymphocytes from lymph nodes, thereby reducing the numbers of autoaggressive TH17 cells that recirculate via lymph and blood to the central nervous system and the sciatic/ischiatic nerves. Based on its lipophilic nature, FTY720 crosses the blood–brain barrier, and ongoing experiments suggest that the drug also down‐modulates S1P1 in neural cells/astrocytes to reduce astrogliosis, a phenomenon associated with neurodegeneration in MS. This may help restore gap‐junctional communication of astrocytes with neurons and cells of the blood–brain barrier. Additional effects may result from (down‐) modulation of S1P3 in astrocytes and of S1P1 and S1P5 in oligodendrocytes. In conclusion, FTY720 may act through immune‐based and central mechanisms to reduce inflammation and support structural restoration of the central nervous system parenchyma. Beyond the autoimmune indications, very recent studies suggest that short‐term, low‐dose administration of FTY720 could help treat chronic (viral) infections. Differential effects of the drug on the trafficking of naïve, central memory and effector memory T cell subsets are discussed.