The novel immunomodulator FTY720 is an effective immunosuppressive agent in experimental models of transplantation and autoimmunity and is currently undergoing phase III clinical trials for multiple sclerosis. Phosphorylated FTY720 is a structural analogue of sphingosine 1-phosphate (S1P) and therefore acts as a high-affinity agonist at four of the five G protein-coupled S1P receptors. It has been well established that there exists a crosstalk between S1P and transforming growth factor (TGF)-beta signaling. Because TGF-beta is the most prominent inductor of fibrosis and myofibroblasts are primarily responsible for excessive matrix protein formation, we examined whether FTY720, in analogy to TGF-beta, induces differentiation of fibroblasts into myofibroblasts. Indeed, FTY720 provoked myofibroblast differentiation comparable with that of TGF-beta. For biological efficacy, FTY720 required endogenous phosphorylation because inhibition of sphingosine kinase completely prevented FTY720 from inducing the differentiation process. Moreover, we identified the lysophospholipid receptor S1P3 as the crucial receptor subtype for FTY720-induced myofibroblast differentiation because the effect was abolished in fibroblasts isolated from S1P3 knockout mice. Finally, we determined that downstream of S1P3 signaling Smad3 activation is essential for myofibroblast differentiation in response to FTY720. Thus, FTY720 may have adverse fibrotic effects related to its activity on S1P3 signaling.