Sphingosine-1-phosphate (S1P) is a sphingolipid metabolite that regulates basic cell functions through metabolic and signaling pathways. Intracellular metabolism of S1P is controlled, in part, by two homologous S1P phosphatases (SPPases), 1 and 2, which are encoded by the Sgpp1 and Sgpp2 genes, respectively. SPPase activity is needed for efficient recycling of sphingosine into the sphingolipid synthesis pathway. SPPase 1 is important for skin homeostasis, but little is known about the functional role of SPPase 2. To identify the functions of SPPase 2 in vivo, we studied mice with the Sgpp2 gene deleted. In contrast to Sgpp1 ؊/؊ mice, Sgpp2 ؊/؊ mice had normal skin and were viable into adulthood. Unexpectedly, WT mice expressed Sgpp2 mRNA at high levels in pancreatic islets when compared with other tissues. Sgpp2 ؊/؊ mice had normal pancreatic islet size; however, they exhibited defective adaptive -cell proliferation that was demonstrated after treatment with either a high-fat diet or the -cell-specific toxin, streptozotocin. Importantly, -cells from untreated Sgpp2 ؊/؊ mice showed significantly increased expression of proteins characteristic of the endoplasmic reticulum stress response compared with -cells from WT mice, indicating a basal islet defect. Our results show that Sgpp2 deletion causes -cell endoplasmic reticulum stress, which is a known cause of -cell dysfunction, and reveal a juncture in the sphingolipid recycling pathway that could impact the development of diabetes.Sphingosine 1-phosphate (S1P) 3 is a potent bioactive lipid produced from the degradation of plasma membrane sphingolipids (1-3). As a signaling molecule, S1P exerts effects in a variety of biological processes through interactions with both extracellular receptors and intracellular targets. As an intracellular metabolic intermediate, S1P is readily metabolized to other bioactive sphingolipids, such as ceramide and sphingosine, as well as to other lipids (Fig. 1A). S1P and its metabolites control basic cell functions, such as proliferation, apoptosis, and migration, and are involved in several pathologic conditions, including inflammation, metabolic disease, and cancer (1, 2). Thus, insight into S1P metabolism and how this regulates its functional activity is of key importance in understanding the role of S1P in biology and disease. S1P is produced by the sphingosine kinase-dependent phosphorylation of sphingosine, which is created as a degradation product of ceramide (4). Within cells, S1P is degraded through two pathways, either by irreversible cleavage by S1P lyase (5) or by dephosphorylation by specific S1P phosphatases (SPPases) (also known as S1P phosphohydrolases) (6). When cleaved by S1P lyase (Sgpl1), phosphoethanolamine and hexadecenal are produced, which are then transferred as substrates from the sphingolipid pathway to the glycerophospholipid pathway.In an alternative catabolic route catalyzed by S1P phosphatases, the resulting sphingosine product can be derivatized with a fatty acid by ceramide synthase to produce cer...