Sphingosine-1-phosphate (S1P) is a pluripotent lipid mediator that transmits signals through a family of G-protein-coupled receptors (GPCRs) to control diverse biological processes including inflammation and wound-healing. In this study, a novel biological activity of S1P in articular chondrocytes was identified. Human primary chondrocytes were cultured in a monolayer. Reverse transcription-polymerase chain reaction (RT-PCR) and western blotting were performed to detect genes and proteins involved in inflammation and cartilage degradation when human primary chondrocytes were stimulated by interleukin (IL)-1β. Matrix metalloproteinase (MMP)-2 and MMP-9 activity was evaluated by gelatin zymography. Glycosaminoglycan (GAG) degradation was evaluated using the dimethylene blue method. Prostaglandin E2 (PGE2) was measured by enzyme-linked immunosorbent assay (ELISA). By using the S1P1 receptor agonist and antagonist, we discovered the key role played by S1P1 in the S1P-dependent inhibition of IL-1β-induced inflammation in human chondrocytes. S1P dose-dependently inhibited IL-1β-induced NF-κB p65, cyclooxygenase (COX)-2, MMP-1, MMP-3, MMP-13 and MMP-14 mRNA expression in human chondrocytes and IL-1β-induced PGE2 synthesis and GAG degradation in human cartilage explants. W146, a known S1P1 receptor antagonist, inhibited the active form of NF-κB p65 and COX-2 expression induced by IL-1β. The anti-inflammatory action of the S1P1 receptor agonist SEW2871 was similar to that of S1P. This study demonstrates that S1P has anti-inflammatory effects on chondrocytes via the S1P1 receptor. Our data suggest that targeting S1P and S1P1 may be a potential therapy for arthritis.