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.