FTY720 is a novel immunomodulator that has proven effective in animal models of transplantation and autoimmunity, has achieved promising results in Phase I and Phase II studies of renal transplantation in humans, and is currently undergoing phase III studies. FTY720 acts as a high-affinity agonist at the sphingosine 1-phosphate receptor-1 (S1P1), where it internalises the receptor and causes alterations to the normal circulation of lymphocytes between the blood and lymphoid tissue. Unlike conventional immunosuppressants, FTY720 does not impair the activation, proliferation or effector functions of T- and B-cells. Further development of FTY720 is in progress, including trials in autoimmune disorders as well as transplantation. This review summarises the mechanism of action of FTY720, its effects in models of transplantation and autoimmunity, and results from clinical trials in humans.