FTY720 is a novel immunomodulatory drug efficacious in the treatment of multiple sclerosis. The drug is converted in vivo to the monophosphate, FTY720-P, by sphingosine kinase 2. This conversion is incomplete, suggesting opposing actions of kinase and phosphatase activities. To address which of the known lipid phosphatases might dephosphorylate FTY720-P, we overexpressed the broad specificity lipid phosphatases LPP1–3, and the specific S1P phosphatases (SPP1 and 2) in HEK293 cells, and performed in vitro assays using lysates of transfected cells. Among LPPs, only LPP3 was able to dephosphorylate FTY720-P; among SPPs, only SPP1 showed activity against FTY720-P. On intact cells, LPP3 acted as an ecto-phosphatase or FTY720-P, thus representing the major phosphatase involved in the equilibrium between FTY720 and FTY720-P observed in vivo.