It has been shown that fingolimod (FTY720) possesses beneficial effects on remyelination in the central nervous system (CNS). In this study, the effects of FTY720 and sodium valproate (VPA) as histone deacetylase inhibitor (HDAC) on the conductivity of visual signals, extent of demyelination area, glial activation, and expression levels of HDAC1and S1PR1 have been evaluated in the optic chiasm of lysolecithin (LPC)-induced demyelination model. In order to produce this demyelination model, LPC (1%, 2 μL) was injected into the rat optic chiasm. Latency of visual waves was measured by visual evoked potential (VEP) recording. The extent of demyelination area and level of glial activation were assessed using immunostaining. Gene expression analysis was performed to evaluate the expression levels of HDAC1, S1PR1, Olig2, and MBP in the optic chiasm. Analysis of electrophysiological data showed that LPC administration increased the latency of visual signals. FTY720 improved the functional recovery of the visual pathway and reduced the level of glial activation in the optic chiasm. FTY720 enhanced myelin repair and up-regulated the expression levels of Olig2 and MBP. Additionally, the expression levels of HDAC1 and S1PR1 were significantly reduced in animals treated with FTY720. In contrast to FTY720 treated animals, administration of VPA could not significantly improve the functional recovery of optic pathway following LPC injection. Cumulatively, the results of the present study demonstrate that FTY720 application improves the functional recovery of the optic pathway by reducing demyelination levels, amelioration of glial activation, and down-regulating of S1PR1 and HDAC1.