Specifically dephosphorylates sphingosine 1-phosphate (S1P), dihydro-S1P, and phyto-S1P. Does not act on ceramide 1-phosphate, lysophosphatidic acid or phosphatidic acid (PubMed:16782891). Sphingosine-1-phosphate phosphatase activity is needed for efficient recycling of sphingosine into the sphingolipid synthesis pathway (PubMed:11756451, PubMed:12815058, PubMed:16782891). Regulates the intracellular levels of the bioactive sphingolipid metabolite S1P that regulates diverse biological processes acting both as an extracellular receptor ligand or as an intracellular second messenger (PubMed:11756451, PubMed:12815058, PubMed:16782891). Involved in efficient ceramide synthesis from exogenous sphingoid bases. Converts S1P to sphingosine, which is readily metabolized to ceramide via ceramide synthase. In concert with sphingosine kinase 2 (SphK2), recycles sphingosine into ceramide through a phosphorylation/dephosphorylation cycle (By similarity). Regulates endoplasmic-to-Golgi trafficking of ceramides, resulting in the regulation of ceramide levels in the endoplasmic reticulum, preferentially long-chain ceramide species, and influences the anterograde membrane transport of both ceramide and proteins from the endoplasmic reticulum to the Golgi apparatus (PubMed:16782891). The modulation of intracellular ceramide levels in turn regulates apoptosis (By similarity). Via S1P levels, modulates resting tone, intracellular Ca(2+) and myogenic vasoconstriction in resistance arteries (PubMed:18583713). Also involved in unfolded protein response (UPR) and ER stress-induced autophagy via regulation of intracellular S1P levels (PubMed:18583713, PubMed:20798685). Involved in the regulation of epidermal homeostasis and keratinocyte differentiation (By similarity). {ECO:0000250|UniProtKB:Q9JI99, ECO:0000269|PubMed:11756451, ECO:0000269|PubMed:12815058, ECO:0000269|PubMed:16782891, ECO:0000269|PubMed:18583713, ECO:0000269|PubMed:20798685}. This is the function of SGPP1 (sphingosine-1-phosphate phosphatase 1, ENSG00000126821).