The complement anaphylatoxin C5a has a pathogenetic role in endotoxin-induced lung inflammatory injury by regulating phagocytic cell migration and activation. Endotoxin and C5a activate the enzyme sphingosine kinase (Sphk) 1 to generate the signaling lipid sphingosine-1-phosphate (S1P), a critical regulator of phagocyte function. We assessed the function of Sphk1 and S1P in experimental lung inflammatory injury and determined their roles in anaphylatoxin receptor signaling and on the expression of the two C5a receptors, C5aR (CD88) and C5L2, on phagocytes. We report that Sphk1 gene deficient (Sphk1(-/-)) mice had augmented lung inflammatory response to endotoxin compared to wild type mice. Sphk1 was required for C5a-mediated reduction in cytokine and chemokine production by macrophages. Moreover, neutrophils from Sphk1(-/-) mice failed to upregulate the anaphylatoxin receptor C5L2 in response to LPS. Exogenous S1P restored C5L2 cell surface expression of Sphk1(-/-) mouse neutrophils to wild type levels but had no effect on cell surface expression of the other anaphylatoxin receptor, CD88. These results provide the first genetic evidence of the crucial role of Sphk1 in regulating the balance between expression of CD88 and C5L2 in phagocytes. S1P-mediated up-regulation of C5L2 is a novel therapeutic target for mitigating endotoxin-induced lung inflammatory injury.