Sphingolipids are crucial molecules of the mammalian epidermis. The formation of skin-specific ceramides contributes to the formation of lipid lamellae, which are important for the protection of the epidermis from excessive water loss and protect the skin from the invasion of pathogens and the penetration of xenobiotics. In addition to being structural constituents of the epidermal layer, sphingolipids are also key signaling molecules that participate in the regulation of epidermal cells and the immune cells of the skin. While the importance of ceramides with regard to the proliferation and differentiation of skin cells has been known for a long time, it has emerged in recent years that the sphingolipid sphingosine 1-phosphate (S1P) is also involved in processes such as the proliferation and differentiation of keratinocytes. In addition, the immunomodulatory role of this sphingolipid species is becoming increasingly apparent. This is significant as S1P mediates a variety of its actions via G-protein coupled receptors. It is, therefore, not surprising that dysregulation in the signaling pathways of S1P is involved in the pathophysiological conditions of skin diseases. In the present review, the importance of S1P in skin cells, as well as the immune cells of the skin, is elaborated. In particular, the role of the molecule in inflammatory skin diseases will be discussed. This is important because interfering with S1P signaling pathways may represent an innovative option for the treatment of inflammatory skin diseases.