A significant and sustained increase in vascular permeability is a hallmark of acute inflammatory diseases such as acute lung injury (ALI) and sepsis and is an essential component of tumor metastasis, angiogenesis, and atherosclerosis. Sphingosine 1-phosphate (S1P), an endogenous bioactive lipid produced in many cell types, regulates endothelial barrier function by activation of its G-protein coupled receptor S1P(1). S1P enhances vascular barrier function through a series of profound events initiated by S1P(1) ligation with subsequent downstream activation of the Rho family of small GTPases, cytoskeletal reorganization, adherens junction and tight junction assembly, and focal adhesion formation. Furthermore, recent studies have identified transactivation of S1P(1) signaling by other barrier-enhancing agents as a common mechanism for promoting endothelial barrier function. This review summarizes the state of our current knowledge about the mechanisms through which the S1P/S1P(1) axis reduces vascular permeability, which remains an area of active investigation that will hopefully produce novel therapeutic agents in the near future.